Abstract
Online reverse auctions are increasingly being used in industrial sourcing activities. This phenomenon represents a novel emerging area of inquiry with significant implications for sourcing strategies. However, there is little systematic thinking or empirical evidence on the topic. This article reviews the use of these auctions in sourcing activities and highlights four key aspects: (1) the differences from physical auctions and those of the theoretical literature, (2) the conditions for using online reverse auctions, (3) the methods for structuring the auctions, and (4) the evaluations of auction performance. Some empirical evidence on these issues is also provided.
Similar content being viewed by others
References
Anderson, Erin M. and Barton A. Weitz. 1992. “The Use of Pledges to Build and Sustain Commitment in Distribution Channels.”Journal of Marketing Research 29 (February): 18–34.
Anderson, James C. and James A. Narus. 1991. “Partnering as a Focused Market Strategy.”California Management Review 33 (3): 95–113.
Ariely, Dan, Axel Ockenfels, and Alvin E. Roth. 2001. “An Experimental Analysis of Late-Bidding in Internet Auctions.” Working Paper. Sloan School of Management, MIT, Cambridge, MA.
— and Itamar Simonson. 2002. “Buying, Bidding, Playing, or Competing? Value Assessment and Decision Dynamics in Online Auctions.” Working Paper. Sloan School of Management, MIT, Cambridge, MA.
Axelrod, Robert. 1984.The Evolution of Cooperation. New York: Basic Books.
Bajari, Patrick and Ali Hortaçsu. 2000. “Winner’s Curse, Reserve Prices and Endogenous Entry: Empirical Insights from eBay Auctions.” Working Paper. Stanford University, Stanford, CA.
Battalio, R. C., C. A. Kogut, and D. J. Meyer. 1990. “The Effect of Varying Number of Bidders in First-Price Value Auctions: An Application of a Dual Market Bidding Technique.” InAdvances in Behavioral Economics. Vol. 2. Eds. L. Green and J. H. Kagel. Norwood, NJ: Ablex.
Cohn, L. 2000. “B2B: The Hottest Net Bet Yet?”Business Week, January 17, pp. 36–37.
Cox, J. C., V. L. Smith, and J. M. Walker. 1988. “Theory and Individual Behavior of First-Price Auctions.”Journal of Risk and Uncertainty 1:61–99.
Dyer, D., John H. Kagel, and D. Levin. 1989. “Resolving Uncertainty About the Number of Bidders in Independent Private-Value Auctions: A Experimental Analysis.”RAND Journal of Economics 20:268–279.
“E-Auction Playbook.” 2001.Purchasing, June 21, pp. S1–S33.
Emiliani, M. L. 2000. “Business-to-Business Online Auctions: Key Issues for Purchasing Process Improvement.”Supply Chain Management 5 (4): 176–186.
Emiliani, M. L. and D. J. Stec. Forthcoming. “Squaring Online Reverse Auctions With the Caux Round TablePrinciples for Business.” Supply Chain Management.
Ganesan, Shankar. 1994. “Determinants of Long-Term Orientation in Buyer-Seller Relationships.”Journal of Marketing 58 (April): 1–19.
Garvin, Susan and John H. Kagel. 1994. “Learning in Common Value Auctions: Some Initial Observations.”Journal of Economic Behavior and Organization 25 (3): 351–373.
Häubl, Gerald and P. T. L. Popkowski Leszczyc. 2001. “The Effect of Minimum Prices on Value Judgments in Auctions.” Working Paper. School of Business, University of Alberta.
Jap, Sandy D. 2001. “The Impact of Online Reverse Auctions on Buyer-Supplier Relationships.” Working Paper. Emory University.
Kagel, John H. 1995. “Auctions: A Survey of Experimental Research.” InThe Handbook of Experimental Economics. Eds. J. H. Kagel and A. E. Roth. Princeton, NJ: Princeton University Press.
— and Dan Levin. 2001. “Behavior in Multi-Unit Demand Auctions: Experiments With Uniform Price and Dynamic Vickrey Auctions.”Econometrica 69 (2): 413–454.
Kumar, Nirmalya, Louis W. Stern, and Ravi Singh Achrol. 1992. “Assessing Reseller Performance From the Perspective of the Supplier.”Journal of Marketing Research 29 (May): 238–253.
McAfee, R. Preston and John McMillan. 1987. “Auctions and Bidding.”Journal of Economic Literature 25 (2): 699–738.
Milgrom, Paul. 1989. “Auctions and Bidding: A Primer.”Journal of Economic Perspectives 3 (3): 3–22.
— and Robert J. Weber. 1982. “A Theory of Auctions and Competitive Bidding.”Econometrica 50:1089–1122.
Morgan, Robert M. and Shelby D. Hunt. 1994. “The Commitment—Trust Theory of Relationship Marketing.”Journal of Marketing 58 (July): 20–38.
Roth, Alvin E. and Axel Ockenfels. Forthcoming. “Last-Minute Bidding and the Amazon Auctions on the Internet.”American Economic Review.
Ruekert, Robert W. and Gilbert A. Churchill Jr. 1984. “Reliability and Validity of Alternative Measures of Channel Member Satisfaction.”Journal of Marketing Research 21 (May): 226–233.
Smith, Nathan. 2002. “Dynamic Pricing Effects on Strategic Sourcing and Supplier Relations.” Leaders for Manufacturing Thesis. Massachusetts Institute of Technology.
Swinkels, Jeroen M., 2001. “Efficiency of Large Private Value Auctions.”Econometrica 69 (1): 37–68.
Tully, S. 2000. “The B2B Tool That Really Is Changing the World.”Fortune, March 20, 132–145.
Wang, Ruqu. 2000. “Bidding and Renegotiation in Procurement Auctions.”European Economic Review 44:1577–1597.
Weitz, Barton A. and Sandy D. Jap. 1995. “Relationship Marketing and Distribution Channels.”Journal of the Academy of Marketing Science 23 (4): 305–320.
Wilcox, Ronald T. 2000. “Experts and Amateurs: The Role of Experience in Internet Auctions.”Marketing Letters.
Author information
Authors and Affiliations
Additional information
Sandy D. Jap (Ph.D., University of Florida) is an associate professor of marketing at the Goizueta Business School, Emory University. Her research focuses on the development and management of interorganizational relationships such as how to create and manage strategic alliances over time, how to balance their risks and rewards, and how to share the payoffs of close collaborations. The results of this work have been published in a variety of journals and books, including theJournal of Marketing Research, Sloan Management Review, and an array of special issue journals related to channel management, sales force management, competition, and e-commerce. She has done extensive work in e-sourcing and business-to-business e-comerce, particularly in the use of online reverse auctions in industrial procurement activities.
Rights and permissions
About this article
Cite this article
Jap, S.D. Online reverse auctions: Issues, themes, and prospects for the future. J. of the Acad. Mark. Sci. 30, 506–525 (2002). https://doi.org/10.1177/009207002236925
Issue Date:
DOI: https://doi.org/10.1177/009207002236925