Hazard Analysis of Bidder Collusion in Reverse Auctions Based on Petri Nets

Bidder collusion in reverse auctions is a pervasive phenomenon that leads to a series of problems for buyers and their supply chains. This work aims to conduct a hazard analysis on a first-price sealed-bid reverse auction with bidder collusion by applying colored timed Petri nets, in which places and transition nodes represent bidding resources and activities. This work successfully dissects the collusion process, quantifies the harm of collusion, and compares the harm levels. The results of the simulation disclose two main causal factors for bidder collusion information asymmetry and strong relationship between strong bidders. This study also identifies the situations where there is a strong relationship between strong bidders. Based on these findings, several recommendations are proposed to reduce the harm of the ring game in a real reverse auction process. Thus, this study helps the buyers to take control of reverse auctions.