Strategic Sourcing Europe

I remember the early days when running our first auctions and not having really a clue about how long they would last… we even got an auction running for 2 days with a pause during the night… Thousands of auctions later, here come a nice tip (Thanks to Lloyd Keays who found the equation!) to estimate or to manage the duration of your reverse auction. I am talking here about the most popular reverse auctions: the English reverse auctions (where bidders are forced to overbid the lowest bid to get their bid taken into account).

Basically it’s very simple. The duration (Du) is related to the Decrement (De) and to the variance of the lowest bid, from the start (Lbs) to the end (Lbe) of the auction, knowing… that you have in average 2 bids per minute. You followed?

To make a long story short, here is the Equation: Du=(Lbs-Lbe)/(De*2)

Of course, if there is no competition and no bids, then the duration will be the minimum you set in the configuration, with no extensions.

The precision of the duration-estimation is not perfect and relies on a correct-estimation of the winning bid, but nevertheless, it really helps to configure properly the decrement. Let me know your thoughts.