ORIE Colloquium

Alex BelloniDuke
Budget Constrained Procurement

Tuesday, April 9, 2019 - 4:15pm
Rhodes 253

Description
Large buyers frequently purchase using competitive procurements and regularly operate under budget constraints. Despite this, the optimal budget-constrained procurement has remained an open question. We consider a setup in which a buyer with a fixed budget wishes to purchase units of a homogeneous good, up to a maximum demand amount, from symmetric suppliers with privately known constant marginal costs. We show that the optimal budget-constrained procurement is distinctly different from its non-budget-constrained counterpart. With budget constraints, the optimal mechanism (and associated expected buyer surplus) depends on whether incentive constraints are imposed at the interim level or ex post. Any implementation of the optimal interim mechanism involves payments to non-lowest-cost suppliers, and the optimal ex post mechanism with two suppliers involves dual sourcing for some type realizations. Bio: Alexandre Belloni is a professor of decision sciences at the Fuqua School of Business at Duke University. He received his Ph.D. in operations research from the Massachusetts Institute of Technology (2006) and a M.Sc. in mathematical economics from IMPA (2002). He deferred the offer to join the faculty at Duke University to accept the IBM Herman Goldstein Postdoctoral Fellowship (2006-2007). Professor Belloni’s research interests are on statistics and optimization and on their applications to economics and business. His current research focuses on developing and analyzing methods for model selection in econometric problems, and for solving mechanism design problems. He became 2014-2016 F.M. Kirby Research Fellow, and received the 2007 Young Researchers Competition in Continuous Optimization Award and the second prize at the INFORMS 2006 George Nicholson Student Paper Award. His research papers have appeared in journals such as Econometrica, Review of Economic Studies, Annals of Statistics, Marketing Science, Management Science and Operations Research. He has received a grant from the National Science Foundation and has held visiting appointments in other prestigious institutes.