A buyer needs to outsource some component for one of its products. We will assume that this component is the only contributor to cost for the buyer. Once the product is manufactured, it is sold to customers at a price p.

Unfortunately, the demand for the product, and thus for the quantity of components needed, is not known at the planning/outsourcing stage. So the buyer must decide on the purchasing of components with some information about the distribution of demand only.

To obtain the flexibility needed by the buyer, an auction is organized with the following format. Each supplier's bid will consist of two parameters:
- a unit reservation fee, or premium, that will be charged for every unit of capacity reserved by the buyer;
- a unit execution fee, or strike, that will be charged for every component requested by the buyer after demand is revealed.

Given bids from each participant in the auction, the buyer reserves capacity at each supplier. Some time later, demand becomes known, and the buyer meets it with the available capacity in its portfolio. Of course, it will start using the suppliers with smaller execution price, and, as capacity in the cheaper sources is exhausted, moves to suppliers with more expensive execution prices.

This game models the auction. The instructor plays the buyer and the students the suppliers. At the creation of the auction, the instructor needs to specify:
- the number of suppliers present in the auction;
- the number of rounds that will take place;
- the duration between rounds (e.g. 10 minutes).

We will normalize the selling price to p= 100 and the cost parameters of each suppliers will be selected so that every supplier has the opportunity to make some profit.

Given these parameters, each group of students is confronted with the problem of bidding a reservation price r and an execution price e. For this purpose, they can use a simulator where they can test their payments, i.e. the expected profit [the simulator uses the information on everybody's cost parameters, together with the demand distribution]. The specific difficulty at this stage is that they do not know what the other suppliers will bid. In any case, they can use information about the competitors' previous bids and costs. Once the group is ready, it submits a bid to the buyer. At the closing of the current round, the bids of every supplier are revealed to all, and either a new round starts or the auction stops, capacity is allocated to every supplier and the expected payments to each supplier are computed.

To obtain the details on how to use the game, please refer to our tutorial.