Proxy Agent for Combinatorial Reverse Auction with Multiple Buyers

Although combinatorial reverse auction has attracted much attention recently, most studies focus on problems with single buyer and multiple sellers. In this paper, we will study combinatorial reverse auction with multiple buyers and multiple sellers. We propose the concept of proxy buyer to deal with this problem. The proxy buyer consolidates the demands from the buyers and then holds a reverse auction to try to obtain the goods from a set of sellers who can provide the goods. Each seller places bids for each bundle of goods he can provide. The problem is to determine the winners to minimize the total cost to acquire the required items. The main results include: (1) a problem formulation for the combinatorial reverse auction problem; (2) a solution methodology based on Lagrangian relaxation and (3) analysis of numerical results based on our solution algorithms. Keywords—Combinatorial auction, ecommerce, optimization.