We examine the mechanism-design problem for a single buyer to procure purchase options for a homogeneous good when that buyer is required to satisfy an unknown future demand. Suppliers have two-dimensional types in the form of commitment costs and production costs. The efficient schedule of options depends on the distribution of demand. To implement an efficient outcome, we introduce a class of mechanisms which are essentially pivotal mechanisms (Vickrey-Clarke-Groves) with respect to the expected costs of the suppliers. We show that the computational task of running such mechanisms is not burdensome. Our discussion uses electricity markets as an example.
- Games, bidding/auctions: procuring from capacity-constrained suppliers
- Programming, linear: formulating procurement as longest-path
ASJC Scopus subject areas
- Computer Science Applications
- Management Science and Operations Research