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2017, Volume 4, Issue 2

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Frontiers of Engineering Management >> 2017, Volume 4, Issue 2 doi: 10.15302/J-FEM-2017019

Winner determination problem with loss-averse buyers in reverse auctions

. College of Information Science and Engineering, State Key Laboratory of Synthetical Automation for Process Industries, Northeastern University, Shenyang 110819, China; Research Institute of Business Analytics & Supply Chain Management, College of Management, Shenzhen University, Shenzhen 518060, China.. College of Information Science and Engineering, State Key Laboratory of Synthetical Automation for Process Industries, Northeastern University, Shenyang 110819, China.. College of Software, Northeastern University, Shenyang 110819, China

Accepted： 2017-07-05 Available online：2017-07-17
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Abstract

Reverse auctions have been widely adopted for purchasing goods and services. This paper considers a novel winner determination problem in a multiple-object reverse auction in which the buyer involves loss-averse behavior due to uncertain attributes. A corresponding winner determination model based on cumulative prospect theory is proposed. Due to the NP-hard characteristic, a loaded route strategy is proposed to ensure the feasibility of the model. Then, an improved ant colony algorithm that consists of a dynamic transition strategy and a Max-Min pheromone strategy is designed. Numerical experiments are conducted to illustrate the effectiveness of the proposed model and algorithm. We find that under the loaded route strategy, the improved ant colony algorithm performs better than the basic ant colony algorithm. In addition, the proposed model can effectively characterize the buyer’s loss-averse behavior.

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