Deciding on the Mode of Negotiation: To Auction or Not to Auction Electronically

Abstract

SUMMARY Purchasing transactions are increasingly conducted through electronic auctions. Some companies already source 25 percent of their total purchase volume through this electronic mechanism. However, most of these purchasing transactions could, alternatively, be conducted as face‐to‐face negotiations. This article examines (a) when it is feasible to conduct an electronic auction in purchasing, and (b) under what circumstances it is better to source items through an electronic auction as opposed to sourcing them through face‐to‐face negotiations.