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Jan 16, 2006Auctions in SCM1 Auction descriptions Decision-theoretic approach Collusive and no-collusive game- theoretic approach.

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Presentation on theme: "Jan 16, 2006Auctions in SCM1 Auction descriptions Decision-theoretic approach Collusive and no-collusive game- theoretic approach."— Presentation transcript:

1 Jan 16, 2006Auctions in SCM1 Auction descriptions Decision-theoretic approach Collusive and no-collusive game- theoretic approach

2 Jan 16, 2006Auctions in SCM2 Trading Agent Competition: Supply Chain Management game 6 software agents compete to run profitable PC assembly business for 220 days –Bidding for components from 8 suppliers –Bidding for orders from 100’s of customers (simultaneously) –Managing production & delivery planning

3 Jan 16, 2006Auctions in SCM3 Auction Descriptions Cheat-sheets Agent valuations Analogs

4 Jan 16, 2006Auctions in SCM4 Supplier auction Periodic-clear, multi-unit, bizzaro- price auction Bid structure: component type, quantity, date and reserve price Information: 20-day summary, offer price, date & quantity Clearing rules:... The good: Offers of components of type t, satisfying reserve price, satisfying one or both of date and quantity

5 Jan 16, 2006Auctions in SCM5 Supplier pricing i = days in advance d = date i*C ac d = naïve estimate of supply C avl' = supply - demand (not counting RFQs from agents with less reputation) up to date d+i delta = 0.5

6 Jan 16, 2006Auctions in SCM6 Reputation Reputation is ordered : offered ratio. Includes a prior of 2000 ordered & offered + 100 per day. Renormalized on the range [0,0.9] for IMD & Pintel, [0,0.45] for all others, but limited to 1. For each RFQ, offered = max (smallest offer, ordered, 0.2*requested )

7 Jan 16, 2006Auctions in SCM7 Customer auction Simultaneous/sequential, reverse, single-unit, 1st-price auction The good (fully disclosed): Right to sell 1-20 computers of specified type for bid price, or be penalized 5-15% of the reserve price every day late to a maximum of 5 days (after which the order is cancelled) Bid structure: price, date and quantity Clearing rules: Lowest price that satisfies date, quantity & reserve price Information: Whether or not you win, max and min winning bid over auctions for that type of PC, 20 day summary

8 Jan 16, 2006Auctions in SCM8 20-day summary Suppliers –Total ordered/shipped for each class (eg, CPU) –Mean production capacity for each class –Mean price for each component Customers –Total requested/ordered for each SKU –Mean price for each SKU

9 Jan 16, 2006Auctions in SCM9 Valuation and exposure definitions Super-additive valuation: The value of a set of goods is greater than the sum of the values of those goods Sub-additive valuation: The value of a set of goods is less than the sum of the values of those goods Exposure: The risk of winning some sub- optimal set of goods

10 Jan 16, 2006Auctions in SCM10 Exposure in SCM In isolation, every good has negative value: –Components cost money to store –Customers charge for missed shipments Super-additive: Only "matched sets" (components and orders) can turn profit Sub-additive: Too many matched sets will overwhelm production capacity and cause loss

11 Jan 16, 2006Auctions in SCM11 Analogs Compare supplier auctions and 2 nd price –Payment independent of reserve price –Reserve price is a bound on payment –Probability of winning increases monotonically with reserve price –Therefore, Dominant Strategy Truthful? (At least for the reserve price)

12 Jan 16, 2006Auctions in SCM12 Decision theoretic approach to customers Customer side seems to come down to conditional distribution modeling –P ( winning | bid price, state) –State includes auction parameters and known facts about the world (eg, recent prices, 20- day reports) Then bid to maximize valuation –Naïve P()=1 approach –Expectation approach

13 Jan 16, 2006Auctions in SCM13 Decision theoretic approach to suppliers Reserve price is DS Truthful? Large quantities bids can be risky to reputation Effect of local price fluctuations is exaggerated

14 Jan 16, 2006Auctions in SCM14 Non-Collusive Approaches Disrupting markets Disrupting agents Risk-attitudes

15 Jan 16, 2006Auctions in SCM15 Disrupting markets Increasing demand in supplier markets –Limited scope: doesn’t affect customer reserve price (or late penalty) or storage costs High- or low-balling customer auctions (exploiting other agents exposure risks)

16 Jan 16, 2006Auctions in SCM16 Disrupting agents algorithms Crashing unreliable agents (making the impossible happen) Preventing convergence (adding noise to the available information) Exploiting simplistic models (oscillating strategies) What about between-game learning (human and machine)?

17 Jan 16, 2006Auctions in SCM17 Reconsidering reputation Agents can compute their own reputations exactly and can deliberately “manage” them Reputation has monotonic, but “relative” value (best can’t improve, worst can’t get worse) An opportunity for active learning?

18 Jan 16, 2006Auctions in SCM18 Externalities & Risk-attitudes Outcome space can be profitability or it can be the final (relative) rankings –Agent has negative externalities against another’s benefit Utility from ranking –Implies actual value of money is a sum of step functions –Observation of rankings will be very noisy

19 Jan 16, 2006Auctions in SCM19 Collusive Approaches FCC Spectrum Auction –Applications to TAC Set-your-hair-on-fire Collusion

20 Jan 16, 2006Auctions in SCM20 FCC spectrum auction Simultaneous, single-good, English auctions The good: Exclusive rights to broadcast on a given frequency range in a given US city Bid structure: “Real-value” jump bids are allowed Information rules: Bidders are not anonymous Clearing rules: Auctions all clear at once

21 Jan 16, 2006Auctions in SCM21 How to collude in the FCC auction Agents decide on a distribution "outside" of the mechanism Defection is punished by threat or retaliation bids on multiple goods held by the defector Communication through the identity of the bidder and possibly the timing or value of the bid (nothing else needed)

22 Jan 16, 2006Auctions in SCM22 Cost/benefit of collusion Cost: “Freedom” to bid on any auction you wish Benefit: “Protection” from the full costs of market competition

23 Jan 16, 2006Auctions in SCM23 Bad news: prisoner’s dilemma

24 Jan 16, 2006Auctions in SCM24 Outcome of collusion Robust: cartel was a small subset of actual bidders (6 out of 153) Profitable: member of the cartel paid significantly less ($2.50/person vs. $4.34/person) for more (476 out of 1479)

25 Jan 16, 2006Auctions in SCM25 Differences from SCM Auctions are sealed bid Winner and winning bid aren't announced Auctions close periodically

26 Jan 16, 2006Auctions in SCM26 Communication options for SCM Outside channels: "In poor taste" Supplier auctions: Difficult and expensive Customer auctions: The min-bid for a type of PC –Cost to send –Very limited bandwidth –Shared bandwidth

27 Jan 16, 2006Auctions in SCM27 Enforceability in SCM Defector-detection is difficult because of anonymity and sealed-bid –Probabilistic inference? Is enforcement necessary? –Not if the cartel all represent one entity –Multiple agents can advance and cartels would benefit from advancing collectively

28 Jan 16, 2006Auctions in SCM28 Set-your-hair-on-fire collusion Ignoring cost, an agent can disrupt supplier and customer markets indefinitely Agents that can anticipate (or request) disruptions have a significant advantage

29 Jan 16, 2006Auctions in SCM29 What if Collusion is illegal? Set-their-hair-on-fire collusion! –Our martyr agent tries to help another team instead

30 Jan 16, 2006Auctions in SCM30 Thanks!

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