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Research
Companies are using the Internet’s connectivity and convenience to transform
themselves, cut costs, and increase their profitability. The Internet holds enormous
promise to bring cost savings to the “stepchild” in most companies: procurement.
My research primarily focuses on evaluating the efficacy of current procurement
practices and exploring how to improve upon these practices. My research has spanned
the study of ‘standard’ industrial and service procurement auctions and combinatorial
auctions in manufacturing, logistics, energy, and high-tech industries to alternative
procurement mechanisms and dynamic pricing. Below is an overview of my work in designing
competitive business-to-business (B2B) procurement and
dynamic pricing mechanisms as well as links to the papers' introduction
(full working papers provided).
B2B Procurement
Auctions: Designing auctions for B2B markets is generally challenging, since
they typically involve the exchange of multiple products/goods; furthermore, the
potential supplier pool is generally diverse along multiple dimensions. Using a
tools from economics and operations management, I study the impact of critical supplier
operating characteristics, such as capacity constraints, economies of scale, and
learning by doing, on the strategic behavior of auction participants in multi-unit
auctions, and the performance of standard auction formats.
W. J. Elmaghraby (2005) , “The
Effect of Asymmetric Bidder Size on the Performance of an Auction: Are More Bidders
Always Better?,” Management Science, Vol. 51, No. 12 pp. 1763-1776
W. Elmaghraby and S. Oh, “Procurement Auctions
and Eroding Price Contracts in the Presence of Learning by Doing” under review
W. J. Elmaghraby (2003), “The Importance
of Ordering in Sequential Auctions”, Management Science, Vol. 49, no. 5, pp.673-682
W. J. Elmaghraby (2000), “Supply Contract
Competition and Sourcing Policies” MSOM Vol. 2, no 4 pp. 350-371
Alternative Procurement Practices: When companies outsource the procurement of
crucial components in the production process, supplier quality attributes that are
non-contractible or nonverifiable at the time of contracting become increasingly
important. In such settings, a buyer needs a procurement mechanism that allows suppliers
to compete on the basis of quality as well as cost. My research in this area has
focused on the study of current business practices, such as tournaments.
S. Deng and W. J. Elmaghraby, (2005) “Parallel
Sourcing with a Tournament,” Productions and Operations Management:
Special Issue on High Tech Industry Vol. 14, No. 2, pp. 252-276
Energy Markets: With the restructuring of wholesale electricity markets, the
Federal Energy Regulatory Commission (FERC) has emphasized the desire to rely heavily
on markets and market forces, rather than centralized planning processes, to achieve
policy objectives. One of the first paradigm shifts in the market was the introduction
of a wholesale energy market to help guide the more generation of electricity. In
this vein, I have worked on comparing alternative auction formats and their ability
to support productive efficiency in equilibrium. During the period Fall of 2002
to Spring 2005, I was a visiting Scholar with the Federal Energy Regulatory Commission
in Washington DC. With FERC staff and consultants, I explored the issues and difficulties
involved in designing an efficient energy auction and the shortcomings of commonly
adopted market designs, as well as proposed alternative market structures to help
improve the efficiency of wholesale energy and transmission markets.
W. J. Elmaghraby and S. S. Oren (1999), “The Efficiency of Multi-Unit Electricity
Auctions,” The Energy Journal, Vol. 20, no.4, pp. 89-116
W. Elmaghraby, R. O’Neill, M. Rothkopf and W. Stewart (2004), “Pricing
and Efficiency in Lumpy Energy Markets” The Electricity Journal, June, pp. 54-64
W. J. Elmaghraby (2005), “Multi-Unit
Auctions with Dependent Valuations: Issues of Efficiency in Electricity Auctions,”
European Journal of Operations Research Vol. 166, No. 2, pp. 430-448
Combinatorial Auctions: In addition to the use of traditional ‘simple’ auctions,
advances in information technology have also encouraged the use of combinatorial
auctions. A combinatorial auction is an attractive mechanism when there exist strong
complementarities over several goods, and the source of those complementarities
varies for different suppliers. Synergies in production abound; for example, in
manufacturing there are often economies of scale in producing larger quantities;
in logistics, there are great synergies to be gained by combining contiguous and
reverse routes. My research in this area has focused on designing simple bidding
strategies that perform well given limited bidder information. Working with colleagues
in computer science and robotics, have also explored the design of combinatorial
auctions for robot exploration tasks.
N. An, W. J. Elmaghraby and P. Keskinocak (2005), “pdf_docsBidding
strategies and their impact on auctioneer’s revenue in combinatorial auctions”
Journal of Revenue and Pricing Management, Vol. 3, No. 4, 337-357
W. Elmaghraby and P. Keskinocak (2003), “Combinatorial
Auctions in Procurement,” in The Practice of Supply Chain Management, eds. C. Billington, T. Harrison, H. Lee, J. Neale, Kluwer
M. Berhault, H. Huang, P. Keskinocak, Sven Koenig, W. Elmaghraby, P. Griffin,
A. Kleywegt (2003), “Robot Exploration with Combinatorial Auctions,” Proceedings
of the IEEE/RSJ International Conference on Intelligent Robots and Systems, Las
Vegas, October 27-31.
Dynamic Pricing
In addition to the study of procurement, my research has also studied the complementary
topic of pricing the sale of goods and services. While advances in information technology
and e-commerce now offer companies the ability to track information about their
customers’ tastes, and faced near zero costs when changing prices, customers have
also become ‘smarter’, leading to more strategic behavior on their part. Therefore,
sophisticated pricing strategies, such as dynamic pricing, may fare poorly if companies
fail to recognize this increased customer price awareness and strategic behavior.
In a survey of the operations management literature, we found that one serious omission
is the strategic behavior of customers in a dynamic setting. Given the prevalence
of markdown mechanisms in both B2B and B2C settings, we study the optimal design
of markdowns and compare their performance to other popular pricing mechanisms.
W. J. Elmaghraby and P. Keskinocak (2003), “Dynamic
Pricing in the Presence of Inventory Considerations,” Management Science, Vol.
49, no. 10, pp.1287-1309
W. Elmaghraby (2004), “
Auctions and Pricing
in Emarketplaces,” in Handbook of Quantitative Supply Chain Analysis: Modeling
in the eBusiness Era, eds. D. Simchi-Levi, D. Wu, and Z.-J. Shen, Kluwer Academic
Press
W. Elmaghraby, A. Gulcu, P. Keskinocak , “Optimal
Markdown Mechanisms in the Presence of Rational Customers with Multi-unit Demands,”
under review.
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