Coordinating service composition

The fundamental paradigm shift from traditional value chains to agile service value networks implies new economic and organizational challenges. As coordination mechanisms, auctions have proven to perform quite well in situations where intangible and heterogeneous goods are traded. Nevertheless traditional approaches in the area of multiattribute combinatorial auctions are not quite suitable to enable the trade of composite services. A flawless service execution and therefore the requester\u27s valuation highly depends on the accurate sequence of the functional parts of the composition, meaning that in contrary to service bundles, composite services only generate value through a valid order of their components. We present an abstract model as a formalization of a service value network. The model comprehends a graph-based mechanism design to allocate multiattribute service offers within the network, to impose penalties for non-performance and to determine prices for complex services. The mechanism and the bidding language support various types of QoS attributes and their (semantic) aggregation. We analytically show that this variant is incentive compatible with respect to all dimensions of the service offer (quality and price)

Combinatorial Auction-based Mechanisms for Composite Web Service Selection

Composite service selection presents the opportunity for the rapid development of complex applications using existing web services. It refers to the problem of selecting a set of web services from a large pool of available candidates to logically compose them to achieve value-added composite services. The aim of service selection is to choose the best set of services based on the functional and non-functional (quality related) requirements of a composite service requester. The current service selection approaches mostly assume that web services are offered as single independent entities; there is no possibility for bundling. Moreover, the current research has mainly focused on solving the problem for a single composite service. There is a limited research to date on how the presence of multiple requests for composite services affects the performance of service selection approaches. Addressing these two aspects can significantly enhance the application of composite service selection approaches in the real-world. We develop new approaches for the composite web service selection problem by addressing both the bundling and multiple requests issues. In particular, we propose two mechanisms based on combinatorial auction models, where the provisioning of multiple services are auctioned simultaneously and service providers can bid to offer combinations of web services. We mapped these mechanisms to Integer Linear Programing models and conducted extensive simulations to evaluate them. The results of our experimentation show that bundling can lead to cost reductions compared to when services are offered independently. Moreover, the simultaneous consideration of a set of requests enhances the success rate of the mechanism in allocating services to requests. By considering all composite service requests at the same time, the mechanism achieves more homogenous prices which can be a determining factor for the service requester in choosing the best composite service selection mechanism to deploy

Coordination in Service Value Networks - A Mechanism Design Approach

The fundamental paradigm shift from traditional value chains to agile service value networks (SVN) implies new economic and organizational challenges. This work provides an auction-based coordination mechanism that enables the allocation and pricing of service compositions in SVNs. The mechanism is multidimensional incentive compatible and implements an ex-post service level enforcement. Further extensions of the mechanism are evaluated following analytical and numerical research methods

Leveraging Service Incident Analytics to Determine Cost-Optimal Service Offers

In this work we address the challenge for an IT service customer to select the cost-optimal service among different offers by external providers. We describe the customer’s optimization problem by considering the negative monetary impact of potential service incidents on its business. First, we demonstrate that the information currently used in service level agreements may lead to suboptimal customer decisions. Second, we discuss how providers’ private information about the behavior of service delivery environments could be leveraged by the customer when selecting service offers. Third, we propose a procurement auction as a mechanism to optimize total cost for the customer – choosing from different service offers by risk-neutral providers. In introducing this approach, we suggest that customers and providers collaborate to define service performance measures, which allow providers to better tailor service offers to customers’ business requirements

Ecosystem services auctions: the last decade of research

ReviewAuctions offer potential cost-effectiveness improvements over other mechanisms for payments for ecosystem services (PES) contract allocation. However, evidence-based guidance for matching design to application is scarce and research priorities are unclear. To take stock of the current state of the art, we conducted a systematic review and thematic content analysis of 56 peer-reviewed journal articles discussing ES auctions published in the last decade. Auctions were approached from three overlapping perspectives: mechanism design, PES, and policy analysis. Five major themes emerged: (1) performance, including measures like cost-effectiveness and PES criteria like additionality; (2) information dynamics like price discovery and communication effects; (3) design innovations like risk-integrating and spatially coordinated mechanisms; (4) contextual variables like policy context and cultural values; and (5) participation factors. Additional attention from policymakers and continued efforts to coordinate research in this diverse and interdisciplinary subfield may be beneficialinfo:eu-repo/semantics/publishedVersio

Electronic service allocation with private quality information

The efficient allocation of electronic services is a complex business problem. Customers demand electronic services from service providers who supply these services at a specified quality of service (QoS). Electronic marketplaces provide a platform on which multiple customers and multiple providers negotiate the allocation of electronic services. Such marketplaces might be administrated by government authorities or large corporations who aim at a socially optimal allocation. This research addresses the allocation problem for electronic services with private quality information from a mechanism design perspective. By assigning specific reservation functions, multiple customers and multiple providers enunciate their preferences for these services. Once all demands and offers for electronic services are submitted, the mechanism determines an allocation that maximizes the sum of the aggregated preferences. However, the design of such mechanisms is difficult because of the following requirements: (1) Double-sided competition: Multiple competitive customers and multiple competitive providers must be matched together appropriately to generate maximal surplus, (2) QoS-awareness: The QoS desired by customers and the QoS offered by service providers must be internalized in the allocation mechanism, (3) private information: The mechanism must facilitate the allocation of electronic services for which any QoS information is unknown, (4) incentive compatibility: The mechanism has to provide adequate incentives to strategic individuals in order to ensure truthful bidding, (5) individual rationality: The participation decision in the mechanism must be voluntarily to all bidders, (6) budget balance: The mechanism must omit any independent intermediary in order to facilitate distributed decision-making among the participants, (7) optimality: The ultimate objective of the mechanism is to achieve an outcome that is optimal from a social welfare perspective. Standard impossibility theorems from mechanism design theory assert that meeting these requirements simultaneously is not attainable. In particular, ex post optimality cannot be attained when incentive compatibility, individual rationality, and budget balance are required as well. Therefore, the mechanism designer must decide about a viable tradeoff of these requirements. One possible compromise in the presence of privately known QoS is to derive a second-best mechanism that satisfies incentive compatibility, individual rationality, and budget balance. The outcome of such second-best mechanisms can be used to estimate the efficiency loss that must be tolerated in comparison to the first-best outcome. The objectives of this research are to (1) develop a second-best mechanism for allocating electronic services with private quality information and (2) study its efficiency properties in a set of simulation experiments to demonstrate its usefulness. All experiments imply that the asymptotic efficiency of the second-best mechanism is bounded away from 100% even for large markets. This finding is related to the economic concept of informational smallness, which is defined as the incremental impact of an participants QoS on the demand of an electronic service. In the proposed model, each provider offers a service of distinct QoS, and each customer demands a service of distinct QoS. It is this feature of differentiated service quality that prevents the participants from becoming informationally small as the market becomes large. If each participants private information about QoS follows the uniform distribution, the mechanism must tolerate an efficiency loss of more than 31% for an increasing number of customers and providers. In contrast, if private quality information is normally distributed among participants, this research finds that the mechanisms asymptotic inefficiency can be reduced to about 7% as the market size increases on both sides. With asymmetric, beta-distributed QoS, the mechanism arrives at an asymptotic efficiency of more than 91%. These findings are crucial to social planners because in designing service allocation with double-sided competition, they can obtain an accurate estimation of potential efficiency losses that arise from asymmetric information about QoS. On the other hand, the social planner can ensure that every allocation decision is made by the participants only. Hence, the emerging mechanism implementation eludes the need for an external, independent decision maker.Die effiziente Allokation elektronischer Dienste ist ein schwieriges ökonomisches Problem. Kunden fragen elektronische Dienste von Anbietern nach, die diese Dienste mit einer bestimmten Dienstgütequalität anbieten. Elektronische Marktplätze stellen eine Plattform bereit, über die mehrere Kunden und mehrere Anbieter die Allokation elektronischer Dienste aushandeln. Solche Marktplätze können von Regierungsbehörden oder großen Unternehmen betrieben werden, die eine optimale Allokation aus der Sicht der sozialen Wohlfahrt anstreben. Die vorliegende Arbeit befasst sich mit dem Allokationsproblem elektronischer Dienste mit privater Information über die Dienstgütequalität aus der Perspektive des Mechanismus Designs. Durch die Festlegung spezifischer Reservationsfunktionen können Anbieter und Kunden ihre Präferenzen für diese Dienste genau ausdrücken. Sobald alle Gebote für Angebot und Nachfrage abgegeben wurden, bestimmt der Mechanismus eine Allokation, welche die Summe der aggregierten Präferenzen maximiert. Die Gestaltung solcher Mechanismen ist jedoch aufgrund der folgenden Anforderungen schwierig: (1) Doppelseitiger Wettbewerb: Mehrere Kunden und mehrere Anbieter, die gegenseitig im Wettbewerb stehen, müssen auf geeignete Weise allokiert werden, um eine mögliche hohe Rendite zu erzielen. (2) Integration der Dienstgütequalität: Die Dienstgütequalität von Kunden und Anbietern muss in den Mechanismus integriert werden. (3) Private Information: Der Mechanismus muss die Allokation elektronischer Dienste ermöglichen, für welche die Dienstgütequalität unbekannt ist. (4) Anreizkompatibilität: Der Mechanismus muss strategischen Marktteilnehmern angemessene Anreize schaffen, damit wahrheitsgemäße Gebote abgegeben werden. (5) Individuelle Rationalität: Die Teilnahme aller Bieter muss freiwillig sein. (6) Budget-Ausgleich: Der Mechanismus muss ohne einen Intermediär auskommen, um eine verteilte Entscheidungsfindung unter den Teilnehmern zu ermöglichen. (7) Optimalität: Das Ziel des Mechanismus ist es, ein Ergebnis zu erzielen, das aus Sicht der sozialen Wohlfahrt optimal ist. Unmöglichkeitstheoreme aus der Theorie des Mechanismus Designs stellen allerdings fest, dass es unmöglich ist, die vorher genannten Anforderungen gleichzeitig zu erfüllen. Insbesondere kann ex post Optimalität nicht erreicht werden, wenn Anreizkompatibilität, individuelle Rationalität und Budget-Ausgleich gefordert werden. Daher muss der Gestalter des Mechanismus eine geeignete Austauschbeziehung dieser Anforderungen schaffen. Ein möglicher Kompromiss in Märkten mit privater Information über die Dienstgütequalität besteht darin, einen zweitbesten Mechanismus zu entwickeln, der Anreizkompatibilität, individuelle Rationalität und Budget-Ausgleich erfüllt. Das Ergebnis solcher zweitbesten Mechanismen kann dann dazu verwendet werden, den Effizienzverlust im Vergleich zum erstbesten Ergebnis abzuschätzen. Die Zielsetzung dieser Arbeit ist es, (1) einen zweitbesten Mechanismus zur Allokation elektronischer Dienste mit privater Information über die Dienstgütequalität zu entwickeln und (2) die Effizienzeigenschaften dieses Mechanismus in einer Reihe von Simulationsexperimenten zu analysieren, um dessen Nützlichkeit nachzuweisen. Alle Experimente deuten an, dass die asymptotische Effizienz des zweitbesten Mechanismus selbst für große Märkte niemals 100% erreicht. Dieses Ergebnis hängt mit dem ökonomischen Konzept der informationellen Kleinheit zusammen, das definiert ist als der inkrementelle Einfluss der Dienstgütequalität auf die Nachfrage nach elektronischen Diensten. Im Modell dieser Arbeit bietet jeder Anbieter seine Dienste mit spezifischer Dienstgütequalität an und jeder Kunde fragt nach Diensten mit spezifischer Dienstgütequalität. Genau dieses Merkmal von unterschiedlichen Dienstgütequalitäten verhindert, dass die Teilnehmer informationell klein werden, während die Marktgröße zunimmt. Ist die Dienstgütequalität aller Teilnehmer gleichverteilt, so muss der Mechanismus einen Effizienzverlust von 31% hinnehmen, wenn die Anzahl der Marktteilnehmer wächst. Ist dagegen die Dienstgütequalität normalverteilt, kann der Effizienzverlust auf 7% reduziert werden. Liegt eine asymmetrische Betaverteilung zugrunde, so erreicht der Mechanismus eine asymptotische Effizienz von über 91%. Diese Ergebnisse sind entscheidend für wohlfahrtsorientierte Gestalter von Mechanismen in der Hinsicht, dass für Märkte mit doppelseitigem Wettbewerb eine akkurate Abschätzung des Effizienzverlustes vorgenommen werden kann, der dadurch entsteht, dass nur private Informationen über die Dienstgütequalität vorliegen. Andererseits kann sichergestellt werden, dass jede Allokationsentscheidung nur von den Marktteilnehmern selbst getroffen wird. Damit wird die Notwendigkeit der Existenz eines externen, unabhängigen Entscheiders umgangen

The Value of ITC under Climate Stabilization

We assess the effect of ITC in a global growth model, DEMETER-1CCS, with learning by doing where energy savings, an energy transition, and carbon capturing and sequestration (CCS) are the main options for emissions reductions. The model accounts for technology based on learning by doing embodied in capital installed in previous periods. We have run five scenarios, one baseline scenario in which climate change policy is assumed absent, and four stabilization scenarios in which atmospheric CO2 concentrations are stabilized at 550, 500, 450, and 400 ppmv. We find that the timing of emission reductions and the investment strategy is relatively independent of the endogeneity of technological change. The vintages structure of production is more important. But ITC reduces costs by about factor 2, though these benefits only materialize after some decades.Energy, Carbon taxes, Endogenous technological change, Niche markets

Tourism Immiserization: Fact or Fiction?

Tourism plays a major part in the development strategies of both developing and developed countries because of the alleged potential of generating foreign exchange, economic growth and welfare enhancement (Sinclair and Stabler, 1997; Sinclair, 1988). Consequently, in several countries a considerable amount of resources is allocated to further promote the tourism sector in a hope of reaping more economic benefits. However, it is still debatable whether tourism is beneficial for the tourist-receiving country or not. While empirical studies (Adams and Parmenter, 1994; Zhou et al., 1996, Baaijens et al., 1998; Blake, 2000; Blake et. al., 2003; Dwyer et al., 2003), argue that tourism expansion is beneficial to the economy, theoretical studies (Copeland, 1991; Chen and Devereux, 1999; Hazari and Nowak, 2003; Hazari et al., 2003; Nowak et al., 2003) posit that tourism expansion can be immiserizing. This paper critically reviews the theoretical and empirical literature to identify the sources via which tourism expansion can benefit or harm the economy. The issues are then empirically investigated using a CGE model for Mauritius to identify the conditions under which tourism expansion can be immiserizing.Tourism, Immiserization, Welfare, Economic growth