Reverse auctions with transportation and convex costs

Benjamin Heymann, Alejandro Jofré

Abstract: We discuss a procurement problem with transportation losses and piecewise linear production costs. We first provide an algorithm based on Knaster-Tarski’s fixed point theorem to solve the allocation problem in the quadratic losses case. We then identify a monotony condition on the types distribution under which the Bayesian cost minimizing mechanism takes a simple form.