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BidAnalyzer: A Method for Estimation and Selection of Dynamic Bidding Models

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Author Info

  • Sandy D. Jap

    ()
    (Goizueta Business School, Emory University, Atlanta, Georgia 30322)

  • Prasad A. Naik

    ()
    (Graduate School of Management, University of California, Davis, Davis, California 95616)

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    Abstract

    Online reverse auctions generate real-time bidding data that could be used via appropriate statistical estimation to assist the corporate buyer's procurement decision. To this end, we develop a method, called BidAnalyzer, which estimates dynamic bidding models and selects the most appropriate of them. Specifically, we enable model estimation by addressing the problem of ; i.e., only one of suppliers' bids is realized, and the other (-1) bids remain unobserved. To address partial observability, BidAnalyzer estimates the latent price distributions of bidders by applying the Kalman filtering theory. In addition, BidAnalyzer conducts model selection by applying multiple information criteria. Using empirical data from an automotive parts auction, we illustrate the application of BidAnalyzer by estimating several dynamic bidding models to obtain empirical insights, retaining a model for forecasting, and assessing its predictive performance in out-of-sample. The resulting one-step-ahead price forecast is accurate up to 2.95% median absolute percentage error. Finally, we suggest how BidAnalyzer can serve as a device for price discovery in online reverse auctions.

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    File URL: http://dx.doi.org/10.1287/mksc.1080.0363
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    Bibliographic Info

    Article provided by INFORMS in its journal Marketing Science.

    Volume (Year): 27 (2008)
    Issue (Month): 6 (11-12)
    Pages: 949-960

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    Handle: RePEc:inm:ormksc:v:27:y:2008:i:6:p:949-960

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    Related research

    Keywords: competitive bidding; electronic commerce; Internet auctions; Kalman filtering; reverse auctions; supplier sourcing; e-procurement;

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    Cited by:
    1. repec:wyi:wpaper:002025 is not listed on IDEAS
    2. Shachat, Jason, 2009. "Procuring Commodities: Request for Quote or Reverse Auctions?," MPRA Paper 13418, University Library of Munich, Germany.
    3. Jason Shachat & Lijia Wei, 2012. "Procuring Commodities: First-Price Sealed-Bid or English Auctions?," Marketing Science, INFORMS, vol. 31(2), pages 317-333, March.

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