Solving Winner Determination Problems for Auctions with Economies of Scope and Scale

Abstract

Economies of scale and scope describe key characteristics of production cost functions that influence allocations and prices on procurement markets. Auction designs for markets with economies of scale are much less well understood than combinatorial auctions, they require new bidding languages, and the supplier selection typically becomes a hard computational problem. We suggest a bidding language for respective markets, and conduct computational experiments to explore the incremental computational burden to determine optimal solutions brought about by the need to express economies of scope for problems of practical size.