Supply chain coordination with auctions

Supply chain is a decentralized system where material, financial and information flows connect economic agents. There is much inefficiency in supply chain behavior. Recently, considerable attention of researchers is drown to provide some incentives to adjust the relationship of supply chain agents to coordinate the supply chain, i.e., the total profit of the decentralized supply chain is equal to that achieved under a centralized system. There is a vast literature on supply chain coordination recently. Most of coordination mechanisms are based on game theory models and contracts between agents of the supply chain. However, little work has been done on using auctions for supply chain coordination. Auctions are important market mechanisms for the allocation of goods and services. A complex trading model between layers of the supply chain is proposed in the paper. The model is based on so called multidimensional auctions. There is possible to formulate multidimensional auctions as mathematical programming problems. Iterative methods are used to solve the problems.