eCommerce Technology 20-751 Agents and Auctions

20-751 ECOMMERCE TECHNOLOGY

SUMMER 2003

COPYRIGHT © 2003 MICHAEL I. SHAMOS

eCommerce Technology20-751

Agents and Auctions


SUMMER 2003


What is an Agent?

• In real life, a person who acts on your behalf• In eCommerce, a computer program that acts on

your behalf• Agents often perform tasks usually associated with

humans• But: an agent is just a computer program with certain

properties• Synonyms:

– bot– daemon (a supernatural being of Greek mythology

intermediate between gods and men)


SUMMER 2003


Agent Properties

• Autonomous– Acts by itself (independent of user)

• Reactive– Responds to its environment, initiates actions

• Communicative– Communicates with people and other agents

• Goal-driven– Acts until it accomplishes its purpose or learns that it can’t

Intelligent Agents: Key Features

Proactive

Don’t constantly need instructions

Able to work unaided

Learn

Improve theiractions with experience

Adapt to userrequirements

Cooperate

Share information with each other.

Able to agree on subtasks

E-commerce/E-businessAgents

InformationManagementAgents

Really smartAgents

“Hidden” Agents

SOURCE: BEN AZVINE


SUMMER 2003


Examples of Agents

• Search agents– Find web pages. FastSearch, Google

• Metacrawlers– Search multiple indexes. Dogpile, MetaCrawler

• News agents– Locate relevant news stories. TotalNEWS

• Monitors, update agents– Notify user when events occur, e.g. page is modified

ChangeDetection, CyberAlert (company news), Enfish tracker (tracks email, web pages, files) MorningPaper

• Instruction agents– How to do things. eHow (repair a roof)

http://www.alltheweb.com/

http://www.google.com/

http://www.dogpile.com/

http://www.metacrawler.com/index.html

http://totalnews.com/

http://www.changedetection.com/

http://www.cyberalert.com/

http://www.enfish.com/

http://www.enfish.com/

http://www.boutell.com/morning/


SUMMER 2003


Information Agents

• Addresses, phone numbers, reverse directories

– AT&T AnyWho, BigYellow, InfoSpace (by address!)

• Stock bots (financial information, charts, news)– StockPoint, Silicon Investor, biz.yahoo, 1jump

• Filtering agents– Remove unwanted data not fitting profile

http://in-132.infospace.com/_1_469328__info/reverse.htm

http://investor.stockpoint.com/

http://www.siliconinvestor.com/index.gsp

http://biz.yahoo.com/

http://www.1jump.com/


SUMMER 2003


Shopping Agents


SUMMER 2003


Shopping Agents

• Price bots– BestBookBuys, BottomDollar, Point&Shop, PillBot

(medication)• Sale locators

– ShoppingList.com (brick & mortar), ValueFind• Auction notification

– BidFind• Recommenders

– ActiveSalesAssistant

http://www.botspot.com/search/s-shop.htm

http://www.bestbookbuys.com/

http://www.bottomdollar.com/

http://www.pillbot.com/

http://www.valuefind.com/

http://www.vsn.net/af/

http://www.activebuyersguide.com/


SUMMER 2003


Travel Agents

• Information about flights, trains, purchase tickets– USAirways, Orbitz

• Discount Hotels– hoteldiscount!com

• Airplanes in flight– FlightView, FlyteComm, DFW– Chicago tower

http://www.usairways.com/

http://www.180096hotel.com/

http://www.flytecomm.com/cgi-bin/trackflight

http://www.cyberair.com/audio/chiapp/index.html


SUMMER 2003


Examples of Agents• Negotiation agents• Agent Builder Tools• CMU Bot List• CMU Agent Page

http://www.agentbuilder.com/AgentTools/academic.php


SUMMER 2003


Avatars

• A simulated human being• From Sanskrit: “Earthly incarnation of a Hindu god or

goddess”

• Verbot


SUMMER 2003


Agent Technologies

• Table-driven (data lookup)• Rule-based• Goal-directed• Utility-based

inputs

“ ”


SUMMER 2003


Rule-Based Agents

Condition-action rule:

if car-in-front-is-braking then start-braking SOURCE: ANDREAS GEYER-SCHULZ


SUMMER 2003


Business Rules

• Grocery store exampleIF inBasket(french_fries) AND NOT asked(ketchup)

THEN ask(ketchup); ask “Would you care for ketchup to go; with your french fries?”

• Rules that learnIF inBasket(french_fries)

THEN prob(want_ketchup) = SQL( <sql_query> )

; query might involve customer data and ; demographics

IF prob(want_ketchup) > 0.3 AND NOT asked(ketchup)THEN ask(ketchup)


SUMMER 2003


Fuzzy Logic

Traditional set theory:

• Set membership. If bi = 1 then ei T else ei T

• S = { a, b, c, d, e, f, g } b = 0, 0, 1, 1, 0, 1, 1 then T = { c, d, f, g } b is the membership

function

Fuzzy set theory• The membership function can be any value in [0, 1]• Often interpreted as a probability• S = { a, b, c, d, e, f, g } b = ½, 0, 1, ¾, 0, 1, ¼• Now what is T? (g is 25% in T, 75% not in T)


SUMMER 2003


Fuzzy Logic

• IF temperature IS hot AND humidity IS stickyTHEN air_conditioning = high

• What is hot? Is 60° hot? 70°? 80°? 90°?– 60° is definitely not hot; 90° is definitely hot; everything else

is “in between” hot(60) = 0; hot(90) = 1; hot(75) = 0.4 etc.

• What is sticky”?80%, 90%, 100%?

• Fuzzy logic hasfuzzy inferencerules, e. g.A B = A*B

-0.2

0

0.2

0.4

0.6

0.8

1

1.2

0 20 40 60 80 100 120

HOT

COLD

TEMPERATURE, °F


SUMMER 2003


Goal-Directed Agents

Actions are evaluatedwith respect to goals

Will this action get me closer to the goal state?

SOURCE: ANDREAS GEYER-SCHULZ


SUMMER 2003


Static versus Mobile Agents

Static AgentSystem

Mobile Agent System

SOURCE: MITSUBISHI


SUMMER 2003


Contract Formation

ExecutionFramework

BusinessLogic

Formation

Fulfilment

ExecutionFramework

BusinessLogic

Formation

Fulfilment

Buyer Seller

ContractContract

SOURCE: CHRIS PREIST, HP


SUMMER 2003


Event Scheduling

ExecutionFramework

BusinessLogic

Formation

Fulfilment

ExecutionFramework

BusinessLogic

Formation

Fulfilment

Buyer Seller

contract and scheduleexecution



SUMMER 2003


Obligation Pending

ExecutionFramework

BusinessLogic

Formation

Fulfilment

ExecutionFramework

BusinessLogic

Formation

Fulfilment

Buyer Seller

An obligation is pending.Fulfilment is triggered.



SUMMER 2003


Invoke Processes

ExecutionFramework

BusinessLogic

Formation

Fulfilment

ExecutionFramework

BusinessLogic

Formation

Fulfilment

Buyer Seller

Processes to fulfill theobligation are retrievedand invoked



SUMMER 2003


Execute Processes

ExecutionFramework

BusinessLogic

Formation

Fulfilment

ExecutionFramework

BusinessLogic

Formation

Fulfilment

Buyer Seller

Processes are executed



SUMMER 2003


Mark Obligation Fulfilled

ExecutionFramework

BusinessLogic

Formation

Fulfilment

ExecutionFramework

BusinessLogic

Formation

Fulfilment

Buyer Seller


The obligation is fulfilled


SUMMER 2003


Signal Fulfilment

ExecutionFramework

BusinessLogic

Formation

Fulfilment

ExecutionFramework

BusinessLogic

Formation

Fulfilment

Buyer Seller


Notify seller


SUMMER 2003


Acknowledge Fulfilment

ExecutionFramework

BusinessLogic

Formation

Fulfilment

ExecutionFramework

BusinessLogic

Formation

Fulfilment

Buyer Seller


Acknowledge fulfilment


SUMMER 2003


Cooperating Agents

SOURCE: PETER FINGAR

http://home1.gte.net/pfingar/eba.htm

Networks of Agents

Local Objects:• Financial agent• Purchasing agent• Inventory management

agent• Customer Services agent• Other objects

BeverageIntermediate

Agent

3

4

1

2

5

DB2

DB1

SoupIntermediate

Agent

Intermediate Agents: • Interfacing• Networking and searching• Optimal Matching

Gourmet-to-Go

COCA-COLA

CAMPBELL

SOURCE: MOHSEN JAFARI, RUTGERS


SUMMER 2003


Major Ideas

• Agents are the wave of the future– laziness + information overload = agents

• Agent systems are object-oriented and distributed• Agents are mobile• Agents negotiate with and talk to other agents


SUMMER 2003


Auctions

• Process for matching buyers and sellers and setting prices. Allows supply and demand to operate

• “a market institution with an explicit set of rules determining resource allocation and prices on the basis of bids from the market participants”-- McAfee & Macmillan (1987)

• A protocol for exchanging bids and determining a winner

• Thousands of different protocols possible, depending on auction rules

• Auctions are complicated


SUMMER 2003


Auctions

• Foreign exchange ($2T per day)• Securities ($100B per day)• Government debt

– treasury bills > $1T per year, municipal bonds

• Public works (roads, bridges)• Private construction• Frequency spectrum• Oil drilling rights• Fishing quotas• Cars (Japan Aucnet)• Sheep and cattle (Australia)


SUMMER 2003


Price Discovery

• In a marketplace, how are prices set?• Slow movement toward equilibrium, called tatonnement

(from French tâtonner, “to feel one’s way”)• Exchange of price information in many steps• Why? No one wants to reveal his price at the start

• Could be instantaneous if prices were revealed to a neutral agent


SUMMER 2003


Valuations

• Private value : value of the good depends only on the bidder’s own preferences– Refrigerator to be used at home

• Common value : bidder’s value of an item determined entirely by independent valuation– Treasury bills

• Correlated value : bidder’s value depends partly on own preferences & partly on others’ values– Manufacturing contract whose tasks can be

subcontracted out– Goods for resale (art purchased by a dealer)


SUMMER 2003


Auction Rules

• When does the auction start and end?• Who can participate? (public, registered users, trading

partners)• What type of auction?• Is the number of bidders (& Identities) known?• How are bids submitted? (timing, increments) How

many bids?• Can bids be withdrawn?• Who can see the bids? (open, sealed)• How is winner determined? How is price determined?• Payment terms• AUCTION RULES AFFECT THE FINAL PRICE


SUMMER 2003


English Auctions

• One item, one seller, multiple bidders• Bidders call out increasing bids• Auction ends when bidding stops• What price will win this auction?

– Private values: $10, $17, $18, $20, $23

• Answer: the smallest bidding increment over the second-highest bid

• NOT the maximum anyone is willing to bid


SUMMER 2003


Dutch Flower Auction

• Many items, one seller, multiple bidders• Price declines with time according to a clock• First bidder to accept a price wins the auction, buys

the quantity he wants• Auctioneer resets the price clock, restarts• Price tends to go up as supply decreases• Very fast, often used for perishables: flowers, fish


SUMMER 2003


Dutch Flower Auction Clock

SOURCE: BADM.SC.EDUSIMULATION ONTARIO AUCTION WEBCAM


SUMMER 2003


Fish Auction

SOURCE: ALLOT.COM

FISHAUCTION

http://www.allot.com/images/solutions/buyer_uk_quality_auction.jpg

http://www.pefa.com/pefaportal/en/index.htm

http://www.pefa.com/pefaportal/en/index.htm


SUMMER 2003


Single Sealed-Bid Auctions

• One item, one seller, multiple bidders• Bidders each submit ONE bid, which they cannot

withdraw• The highest bid wins• If a bidder values the item at $v, how much should he

bid?

• ANSWER: less than $v, depending on the number of bidders and his estimate of the behavior of other bidders


SUMMER 2003


Sealed-Bid Second-Price(Vickrey) Auctions

• One item, one seller, multiple bidders• Bidders each submit ONE bid, which they cannot

withdraw• The highest bid wins, but the price paid is the amount

of the second-highest bid• If a bidder values the item at $v, how much should he

bid?

• ANSWER: exactly $v


SUMMER 2003


Revenue Equivalence Theorem

• William Vickrey (1961)• The following auction rules produce the same

theoretical revenue for the seller if buyers are risk-neutral in a private-value auction:– English– Dutch (one item)– single sealed-bid– second-price sealed-bid (Vickrey)

• Nobel Prize, 1996


SUMMER 2003


Trading Rules of a Double Auction

BUYERS SELLERS

lowest

highest

Trading price = (buy price + sell price) / 2

Highest buyer matched to the lower seller,

2nd highest buyer is matched to the 2nd lowest seller, etc.

Condition: buy price sell price

54321

5.14.12.82.41.6 PRICE: 3.3

PRICE: 3.2

PRICE: 2.9

SOURCE: JUNLING HU


SUMMER 2003


NASDAQ

• National Association of Securities Dealers Automated Quotations

• 61,000 computers• 6500 stocks• Continuous double auctions (CDA)• ARCA Integrated Book

http://www.archipelago.com/

Some Auction Types

Auction

Double-sidedSingle-sided

Sealed-bid Outcry OutcrySealed-bid

Dutch English

First Priceor

Vickrey

Call Market

Des

cend

ing A

scending

CDAClearing House

AsynchronousS

ynch

rono

us

SOURCE: JUNLING HU

CDA = CONTINUOUS DOUBLE AUCTION, E.G. NEW YORK STOCK EXCHANGE


SUMMER 2003


Type of Auctions % Sites

English 85 eBay, egghead, Auction.co.kr, eSellpia and most auction sites

First Price Sealed Bid 7 The Chicago Wine Company; Timeshare Resale International

Dutch 4 Klik-Klok Department Store; Bookbid

Vickrey 1 Antebellum Covers (www.antebellumcovers.com)

Continuous Double Auction 1 Auction Depot (www.auctiondepot.com)

Sealed Double Auction 1 Fastparts (www.fastparts.com)

eAuction Types Used in Practice

SOURCE: BEAM & SEGEV

AuctionTypes

SOURCE:LAUDON & TRAVER


SUMMER 2003


Buyer

Seller

register

Pref.

alert search

select

display bid

Registration Pref.&Target

ProductAuctionRules

Short list

auction

target

define

update

register

notifynotify

Setupauction

cancel

update

START

bids

offer

select

END

auction

evaluate

registration Product description& auction setup

bidding Auction close& evaluating bids

Delivery & Payment

SOURCE: JERRY GAO

Online Auction Structure


SUMMER 2003


Major Ideas

• Auctions are the most important market mechanism• Primarily an information exchange protocol• Very complicated: small changes to rules cause large

changes in behavior• Agents can be used in auctions


SUMMER 2003


QA&

eCommerce Technology 20-751 Agents and Auctions

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