electronic auctions and expressive mechanisms
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Electronic Auctions and Expressive Mechanisms
V Sai Manoj
P S Pavan Kumar
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AGENDA
Introduction
What Is An Auction
Types Of Auctions
What is the economic rationale behind auctions A Framework for Auctions
Auction Protocol
Expressive Mechanisms
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WHAT IS AN ACTION ?
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WHAT IS AN ELECTRONIC ACTION ?
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AUCTIONS
Types of auctions.
English Auctions
Dutch Auctions
Sealed first-price auction
Sealed second-price auction
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ENGLISH AUCTION
These are the most common auctions in practice.
Bids ascend, winner gets the item at the price hebid.
Optimal strategy, bid a little more than the nexthighest person.
Just keep going until no one else is bidding.
For the seller to be happy, there must be enoughcompetition to drive up bids
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DUTCH AUCTION
Start at max, auctioneer gradually decreases bid.
Equivalent in terms of revenue to a first-priceauction.
Has the advantage of closing quickly
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SEALED FIRST-PRICE AUCTION
All bidders simultaneously submit sealed bids sothat no bidder knows the bid of any otherparticipant.
The highest bidder pays the price they submitted.
Commonly used in tendering, particularly forgovernment contracts and auctions for miningleases.
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SEALED SECOND-PRICE AUCTION
Submission of bids are same as Sealed first-priceauction.
But the winning bidder pays the second highest bidrather than his or her own.
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REVERSE AUCTIONS
Completely opposite to the forward auction.
In forward auction seller puts an item for sale. Andask bidders to bid.
But, in reverse auctions bidder asks for an item.Sellers will place their respective bids.
Buyer selects the seller who has the lowest price and allthe specifications met.
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FIXED VS DYNAMIC PRICING
Fixed Pricing
Seller sets sales price for an item, and the purchase ismade when a buyer comes along to pay that price.
Took hold when industrial revolution started.
When Demand was higher than Production
Example of Fixed pricing is “Buy It Now” in eBay.
Competition, globalisation and better production
techniques led to a higher production than demand. Now business needs to compete with sales.
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FIXED VS DYNAMIC PRICING CNTD…
Dynamic Pricing
The opening bid amount, is established by seller andpotential buyers offer to pay that price or go beyond itthrough incremental bids.
Prices that are determined based on supply anddemand relationships at any given time.
Ensures sales to businesses.
Example of Dynamic pricing is “Bids” in eBay.
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AUCTIONS AS CO-ORDINATION MECHANISM
Efficient co-ordination mechanism for establishingan equilibrium
Automated auction among software agents tocontrol air conditioning at Xerox (Markoff 1996)
Allocation of telecommunication bandwidth
Little or no human intervention during the tradingprocess.
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AUCTIONS AS A SOCIAL MECHANISM TO DETERMINE A PRICE
Objects which are
Not traded on traditional markets
Unique or rare items
Which are offered randomly or at long intervals
Attracts Potential Buyers
Offers numerous of these special items at one time andthere by attracts a good amount of attention
Piece of fine art or rare items as well as auctions ofcommunication frequencies (cf.Lewyn 1994; Cramton1995)
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AUCTIONS AS EFFICIENT ALLOCATION MECHANISMS
Limited shelf life or last minute
products
Overstocked products
Discontinued or reconditioned item
Accept the product restrictions in return for asignificant discount
Auctioneer maintains the depth and width of themarket
A typical example of this type of auction is Onsale(cf. Economist 1997).
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A Framework for Auctions
Supplier
Customer
Auctioneer Auction
TradeObjects RuleBase
Transaction Phase
WWW/IT
Effect
CompetingAuctionsand Trade Forms
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ACCESS RULES FOR BUYERS AND SUPPLIERS
Institutional design main parameters
Depends on the reputation
Trading goods are available
Promised quality or whether trades are executedwithout frictions
Control mechanisms, required advance payments orother credible commitments of the participants
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THE IMPACT OF THE WEB
Standardized mechanisms for hypermediarepresentation of trade objects
The development and diffusion of standardizedsearch mechanisms and event-driven notificationof bidders as well as.
Mechanisms for secure payments encouragecustomers to opt for Web auctions with electronictrade execution.
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Parameter Impact of the Web
Auctioneer Lower entry barriers, opportunity for direct sales
Access rules Customizable, theoretically millions of potentialcustomers can be reached
Trading objects Focused product segments can be auctioned off,the technology extends the complexity of the productdescription
Trading rules The trading rules reflect the lack of a guaranteedservice
Settlement For digital products the entire trading cycle can behandled on the Web for physical products the tradingprocess and the physical logistics of the trade
objects can be separated, leading to a reduction of
costs.
THE IMPACT OF THE WEB
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AUCTION PROTOCOL
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WHY?
Set of rules
E2E communication
Buyers should reach the truth-full information
Sellers should get accountable Bids
Auctioneers should get to be trusted
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CRYPTOGRAPHIC SUPPORT
To verify a particular auction notice being postedand accessible over a certain period of time
During the process of bidding, the bids should notget tampered and should not disclosed to thebidders
In open outcry auctions, the seller or auctioneerhave a chance to increase the bid-rates.
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CRYPTOGRAPHIC SUPPORT CNTD…
In order to avoid that there should be verifiableconnection between the bidder to another knownbidder.
Presence of knowledgeable bidder should beanonymous.
But internet auctions cant get through thismechanism.
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ONLINE AUCTION PROTOCOL
Different auction protocols have been designed toachieve different goals and requirements
Some auction protocols based on the common
rules
Some auction protocols based addressing thetiming issue of the internet auctions
Every auction protocol have developed based onthe well-known algorithms or procedures like RSA,SSL, DES.
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SEALED-BID
Goal :- Implement sealed-bid protocol in secured
manner.
Process :- Bidding process will be done secretly foran advertisement.
Winner is decided based on the publically known
rule.
Examples :- U.S Govt used this to sell a Govt land.
Issues while developing the protocol Time of disclosure is important.
Non-repudiation mechanisms to ensure payments collected fromthe bid winners
As it is surrounded by secrecy, it may have difficult for bidders tobelieve the validity of auction
Bidders to be anonymous
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TWO PHASES-TWO PROPERTIES
Bidding secretly Opening and announcing winner
These process should ensure two properties Validity :-
The auction eventually closes The winner will be announced based on publically known rule The money collected from the winner should be equal to his
bidding amount Looser bidders wont get any money. Only winning bidder can collect the item.
Secrecy :- Identity of bidder and biddings wont revealed Anonymous bids allowed The messages between the bidders and sellers wont get
interrupted or manipulated
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SEALED-BID PROTOCOLS
Millionaire's Protocol :- Auctioneer A receives Bids from n bidders
The bid range in integers will be set
Each maintain their own encrypt and decrypt functions
Once winner has been announced, the bidder will reach thebid-taker and gives his secret private encryption function
Sealed-Bid protocols with secretsharing shared polynomials :-
Auctions that seeks the address of being economical, fast-access, maintaining privacy
Avoiding the possibility of final bidding is artificially low.
With some modifications, anonymity can be achieved
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Sealed first-price auction Working
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SEALED FIRST-PRICE AUCTION
Step – 1 Registration
b1->blind(PKps) SIGa(b1)
b2->blind(TLP(B)) SIGa(b2)
SIGb(b1,b2,auct)
CERT(PKb)
Step – 2 Bid Submission
Bob encrypts his bid with secret symmetric key K
M->bid,auct_id
Signs M with SKPS Valid Bid (V)
Anonymously sends V, TR AuctioneerBob gets a RECEIPT
He verifies this using CERT(PKs)
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SEALED FIRST-PRICE AUCTION CNTD…
Step- 3 Publication Committed Bids
After process closes Auctioneer publish the committedbids
Step -4 Bids Revelation
Bob reveals himself by sending pair(K,RECEIPT) toAuctioneer
He verifies Bob in Database
Uses K to decrypt the encrypted bid
If Bob will not submit K with in time t, bid will trace backto Bob by solving
Time-Lock Puzzle.
Step- 5 Final Result
Auctioneer decrypted bids, keys used will be published
Step-6 The winner Proof
Bob sends his bid by using his signature, if he is the winnerthe bid will be revealed by solving Time-Lock Puzzle TR.
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EXPRESSIVE MECHANISMS
Especially on the internet have begun allowingpeople or organizations to express richerpreferences in order to provide for greater levels ofoverall satisfaction.
Major Terms
Per-click valuations
Per impression valuations
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EXPRESSIVE MECHANISMS
Expressive mechanisms is adopted in many areaslike
Chemicals
Packaging
Ingredients and raw materials
Marketing
Technology
Medical
Transportation and industrial parts
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BROADER TREND TOWARD EXPRESSIVENESS 5 / 5 / 2 0 1 2
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EXPRESSIVENESS IN SOCIAL NETWORKING
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CONCLUSION
The Web has provided low-cost access to a global
market space and at the same time highly focused
customer groups.
The wide availability of standardized software clients forthe access to auctions, in most cases just Web
browsers, has extended the group of potential
participants.
Cost-efficient communication infrastructures and low-
cost market-engines have enabled auctioneers to set up
auctions quickly and with limited investments.
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