An Agent Based Market Design Methodology for Combinatorial Auctions

Auction mechanisms have attracted a great deal of interest and have been used in diverse e-marketplaces. In particular, combinatorial auctions have the potential to play an important role in electronic transactions. Therefore, diverse combinatorial auction market types have been proposed to satisfy market needs. These combinatorial auction types have diverse market characteristics, which require an effective market design approach. This study proposes a comprehensive and systematic market design methodology for combinatorial auctions based on three phases: market architecture design, auction rule design, and winner determination design. A market architecture design is for designing market architecture types by Backward Chain Reasoning. Auction rules design is to design transaction rules for auctions. The specific auction process type is identified by the Backward Chain Reasoning process. Winner determination design is about determining the decision model for selecting optimal bids and auctioneers. Optimization models are identified by Forward Chain Reasoning. Also, we propose an agent based combinatorial auction market design system using Backward and Forward Chain Reasoning. Then we illustrate a design process for the general n-bilateral combinatorial auction market. This study serves as a guideline for practical implementation of combinatorial auction markets design.Combinatorial Auction, Market Design Methodology, Market Architecture Design, Auction Rule Design, Winner Determination Design, Agent-Based System

A graphical formalism for mixed multi-unit combinatorial auctions

Mixed multi-unit combinatorial auctions are auctions that allow participants to bid for bundles of goods to buy, for bundles of goods to sell, and for transformations of goods. The intuitive meaning of a bid for a transformation is that the bidder is offering to produce a set of output goods after having received a set of input goods. To solve such an auction the auctioneer has to choose a set of bids to accept and decide on a sequence in which to implement the associated transformations. Mixed auctions can potentially be employed for the automated assembly of supply chains of agents. However, mixed auctions can be effectively applied only if we can also ensure their computational feasibility without jeopardising optimality. To this end, we propose a graphical formalism, based on Petri nets, that facilitates the compact represention of both the search space and the solutions associated with the winner determination problem for mixed auctions. This approach allows us to dramatically reduce the number of decision variables required for solving a broad class of mixed auction winner determination problems. An additional major benefit of our graphical formalism is that it provides new ways to formally analyse the structural and behavioural properties of mixed auctions. © 2009 Springer Science+Business Media, LLC.This work was funded by the Jose Castillejo programme (JC2008-00337), IEA (TIN2006-15662-C02-01), OK (IST-4-027253-STP), eREP(EC-FP6-CIT5-28575) and Agreement Technologies (CONSOLIDER CSD2007-0022, INGENIO 2010)Peer Reviewe

Strategic development in the petrochemical industry

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Decentralized supply chain formation using max-sum loopy belief propagation

Supply chain formation is the process by which a set of producers within a network determine the subset of these producers able to form a chain to supply goods to one or more consumers at the lowest cost. This problem has been tackled in a number of ways, including auctions, negotiations, and argumentation-based approaches. In this paper we show how this problem can be cast as an optimization of a pairwise cost function. Optimizing this class of energy functions is NP-hard but efficient approximations to the global minimum can be obtained using loopy belief propagation (LBP). Here we detail a max-sum LBP-based approach to the supply chain formation problem, involving decentralized message-passing between supply chain participants. Our approach is evaluated against a well-known decentralized double-auction method and an optimal centralized technique, showing several improvements on the auction method: it obtains better solutions for most network instances which allow for competitive equilibrium (Competitive equilibrium in Walsh and Wellman is a set of producer costs which permits a Pareto optimal state in which agents in the allocation receive non-negative surplus and agents not in the allocation would acquire non-positive surplus by participating in the supply chain) while also optimally solving problems where no competitive equilibrium exists, for which the double-auction method frequently produces inefficient solutions. © 2012 Wiley Periodicals, Inc

Introduction of Electronic Combinatorial Auction to a Food Manufacturer

Food manufactures often face difficult purchasing decisions when multiple business constraints and several bidding options affect them. The objective of the buying organization is to ensure corn sweeteners are purchased so as to minimize the total operational cost. To do so, the purchasing department compared the conventional method of a sealed-bid auction to, first, a reverse auction with single-item bids and, then, to a reverse auction with bundled bids. The senior author—as director of corporate purchasing—researched, proposed and executed the combinatorial auction to source corn sweeteners for a large, processed-meat manufacturer who uses large quantities of four corn sweeteners at its eight processing plants located across the United States. Two buying techniques were — electronic reverse auctions and combinatorial reverse electronic auctions. First, we present the difficulties of using a reverse combinatorial auction and describe the method used to obtain the least cost combination of bids that satisfies buyer’s RFQ. Second, we show the progression of the bidding rounds and estimate the savings from this combinatorial auction as compared to what the company did with either a manual or a reverse single item auction. Finally, we address the diminishing marginal returns of repeated usage of CeRA, and describe how this food company advanced from the auction setting to a risk-management-based procurement process.Citation: Harris, K. D., Biere, A. W. (2014) Introduction of Electronic Combinatorial Auction to a Food Manufacturer. International Food and Agribusiness Management Review, 17(3

An Investigation Report on Auction Mechanism Design

Auctions are markets with strict regulations governing the information available to traders in the market and the possible actions they can take. Since well designed auctions achieve desirable economic outcomes, they have been widely used in solving real-world optimization problems, and in structuring stock or futures exchanges. Auctions also provide a very valuable testing-ground for economic theory, and they play an important role in computer-based control systems. Auction mechanism design aims to manipulate the rules of an auction in order to achieve specific goals. Economists traditionally use mathematical methods, mainly game theory, to analyze auctions and design new auction forms. However, due to the high complexity of auctions, the mathematical models are typically simplified to obtain results, and this makes it difficult to apply results derived from such models to market environments in the real world. As a result, researchers are turning to empirical approaches. This report aims to survey the theoretical and empirical approaches to designing auction mechanisms and trading strategies with more weights on empirical ones, and build the foundation for further research in the field