A Hybrid Negotiation-Auction Mechanism for Design Sourcing

DS 58-3: Proceedings of ICED 09, the 17th International Conference on Engineering Design, Vol. 3, Design Organization and Management, Palo Alto, CA, USA, 24.-27.08.2009

Year: 2009
Editor: Norell Bergendahl, M.; Grimheden, M.; Leifer, L.; Skogstad, P.; Lindemann, U.
Author: Chen, Songlin; Tseng, Mitchell
Series: ICED
Section: Design Organization and Management
Page(s): 229-238


The source of innovation is increasingly coming from outside instead of within, which makes it an imperative for companies to effectively source designs. However, design sourcing involves complex and coupled decisions in both engineering and economic domains due to information asymmetry, information stickiness, and conflicting incentives. This paper models design sourcing as a contracting problem with an embedded collaborative design problem. A hybrid negotiation-auction mechanism is proposed to reconcile the conflict between competition and collaboration in information sharing and problem solving. The mechanism proves to be socially efficient and provides necessary flexibility as well as incentives for design innovation.

Keywords: sourcing, contracting, negotiation, auction


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