Negotiation and/or auction? – A status quo analysis

In B2B markets, negotiations are a common choice to close a deal between buyer and seller. However, procurement managers started to replace or complement negotiations by designing auctions to improve their outcome. The question remains, in which situations is it better to design an auction or to use a combination instead of negotiating. Therefore, the aim of this paper is to give an overview of relevant factors for the choice of the used mode – negotiation, auction or a combination. A brief literature review presents necessary requirements for designing an auction and sufficient factors for the choice of an adequate negotiation mode. Findings reveal that procurement auctions lead to better economic outcomes compared to multi-bilateral negotiations in both, single and multi-item cases. However, this narrow focus ignores further important factors (e.g. relationship). The comparison of sequential-bilateral negotiations and auctions as well as possible combinations need further examination.