Fast Iterative Combinatorial Auctions via Bayesian Learning

Iterative combinatorial auctions (CAs) are often used in multi-billion dollar domains like spectrum auctions, and speed of convergence is one of the crucial factors behind the choice of a specific design for practical applications. To achieve fast convergence, current CAs require careful tuning of the price update rule to balance convergence speed and allocative efficiency. Brero and Lahaie (2018) recently introduced a Bayesian iterative auction design for settings with single-minded bidders. The Bayesian approach allowed them to incorporate prior knowledge into the price update algorithm, reducing the number of rounds to convergence with minimal parameter tuning. In this paper, we generalize their work to settings with no restrictions on bidder valuations. We introduce a new Bayesian CA design for this general setting which uses Monte Carlo Expectation Maximization to update prices at each round of the auction. We evaluate our approach via simulations on CATS instances. Our results show that our Bayesian CA outperforms even a highly optimized benchmark in terms of clearing percentage and convergence speed.Comment: 9 pages, 2 figures, AAAI-1

Load Balancing in the Smart Grid: A Package Auction and Compact Bidding Language

Distribution system operators (DSOs) are faced with new challenges from the continuous integration of fluctuating renewable energy resources and new dynamic customer loads such as electric vehicles, into the power grid. To ensure continuous balancing of supply and demand, we propose procurement package auctions to allocate load flexibility from aggregators and customers. The contributions of this research are an incentive-compatible load flexibility auction along with a compact bidding language. It allows bidders to express minimum and maximum amounts of flexibility along with unit prices in single bids for varying time periods. We perform a simulation-based evaluation and assess costs and benefits for DSOs and balancing suppliers given scenarios of varying complexity as well as computational aspects of the auction. Our initial findings provide evidence that load flexibility auctions can reduce DSO costs substantially and that procurement package auctions are well-suited to address the grid load balancing problem

Designing smart markets

Electronic markets have been a core topic of information systems (IS) research for last three decades. We focus on a more recent phenomenon: smart markets. This phenomenon is starting to draw considerable interdisciplinary attention from the researchers in computer science, operations research, and economics communities. The objective of this commentary is to identify and outline fruitful research areas where IS researchers can provide valuable contributions. The idea of smart markets revolves around using theoretically supported computational tools to both understand the characteristics of complex trading environments and multiechelon markets and help human decision makers make real-time decisions in these complex environments. We outline the research opportunities for complex trading environments primarily from the perspective o

Pricing in Non-Convex Markets: How to Price Electricity in the Presence of Demand Response

A Walrasian competitive equilibrium defines a set of linear and anonymous prices where no coalition of market participants wants to deviate. Walrasian prices do not exist in non-convex markets in general, with electricity markets as an important real-world example. However, the availability of linear and anonymous prices is important for derivatives markets and as a signal for scarcity. Prior literature on electricity markets assumed price-inelastic demand and introduced numerous heuristics to compute linear and anonymous prices on electricity markets. At these prices market participants often make a loss. As a result, market operators provide out-of-market side-payments (so-called make-whole payments) to cover these losses. Make-whole payments dilute public price signals and are a significant concern in electricity markets. Besides, demand-side flexibility becomes increasingly important with growing levels of renewable energy sources. Demand response implies that different flexibility options come at different prices, and the proportion of price-sensitive demand that actively bids on power exchanges will further increase. We show that with price-inelastic demand there are simple pricing schemes that are individually rational (participants do not make a loss), clear the market, support an efficient solution and do not require make-whole payments. With the advent of demand-side bids, budget balanced prices (no subsidies are necessary) cannot exist anymore, and we propose a pricing rule that minimizes make-whole payments. We describe design desiderata that different pricing schemes satisfy and report results of experiments that evaluate the level of subsidies required for linear and anonymous prices on electricity spot markets with price-sensitive demand

Retail Warehouse Loading Dock Coordination by Core-selecting Package Auctions

Congestions at loading docks can cause severe delays in logistics processes and cause increasing bottlenecks for truck routes. For warehouses, uncoordinated arrivals of trucks make appropriate staffing difficult and congestions can interfere with other processes at the facility. To mitigate congestions at loading docks, we propose package auctions to allocate time slots to trucks. \ \ The contribution of this research is the application of core-selecting package auctions to address the loading dock congestion problem. We propose a bidding language and a core-selecting package auction for this setting based on existing literature. Core-selecting payment rules can avoid drawbacks of the Vickrey–Clarke–Groves (VCG) mechanism with Clarke pivot rule, e.g., low perceived fairness of prices. \ \ We evaluate our proposal by means of simulation and assess (i) the potential for waiting time reduction compared to uncoordinated arrivals as well as sharing of historical waiting times, (ii) the empirical complexity of the computational problem for scenarios of varying complexity, and (iii) the relation of VCG and bidder-Pareto-optimal core payments. Our findings provide evidence that loading dock auctions can alleviate congestion substantially and that the core-pricing rule is well-suited to address the price fairness and low seller revenue problems in this setting

A Free Exchange e-Marketplace for Digital Services

The digital era is witnessing a remarkable evolution of digital services. While the prospects are countless, the e-marketplaces of digital services are encountering inherent game-theoretic and computational challenges that restrict the rational choices of bidders. Our work examines the limited bidding scope and the inefficiencies of present exchange e-marketplaces. To meet challenges, a free exchange e-marketplace is proposed that follows the free market economy. The free exchange model includes a new bidding language and a double auction mechanism. The rule-based bidding language enables the flexible expression of preferences and strategic conduct. The bidding message holds the attribute-valuations and bidding rules of the selected services. The free exchange deliberates on attributes and logical bidding rules for automatic deduction and formation of elicited services and bids that result in a more rapid self-managed multiple exchange trades. The double auction uses forward and reverse generalized second price auctions for the symmetric matching of multiple digital services of identical attributes and different quality levels. The proposed double auction uses tractable heuristics that secure exchange profitability, improve truthful bidding and deliver stable social efficiency. While the strongest properties of symmetric exchanges are unfeasible game-theoretically, the free exchange converges rapidly to the social efficiency, Nash truthful stability, and weak budget balance by multiple quality-levels cross-matching, constant learning and informs at repetitive thick trades. The empirical findings validate the soundness and viability of the free exchange