jan 16, 2006auctions in scm1 auction descriptions decision-theoretic approach collusive and...
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Jan 16, 2006 Auctions in SCM 1
Auctions in SCM
•Auction descriptions•Decision-theoretic approach•Collusive and no-collusive game-theoretic approach
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Jan 16, 2006 Auctions in SCM 2
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
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Jan 16, 2006 Auctions in SCM 3
Auction Descriptions
•Cheat-sheets
•Agent valuations
•Analogs
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Jan 16, 2006 Auctions in SCM 4
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
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Jan 16, 2006 Auctions in SCM 5
Supplier pricing
• i = days in advance• d = date• i*Cac
d = naïve estimate of supply• Cavl' = supply - demand (not counting RFQs from
agents with less reputation) up to date d+i• delta = 0.5
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Jan 16, 2006 Auctions in SCM 6
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 )
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Jan 16, 2006 Auctions in SCM 7
Customer auctionSimultaneous/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
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Jan 16, 2006 Auctions in SCM 8
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
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Jan 16, 2006 Auctions in SCM 9
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
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Jan 16, 2006 Auctions in SCM 10
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
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Jan 16, 2006 Auctions in SCM 11
Analogs
• Compare supplier auctions and 2nd 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)
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Jan 16, 2006 Auctions in SCM 12
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
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Jan 16, 2006 Auctions in SCM 13
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
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Jan 16, 2006 Auctions in SCM 14
Non-Collusive Approaches
•Disrupting markets
•Disrupting agents
•Risk-attitudes
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Jan 16, 2006 Auctions in SCM 15
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)
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Jan 16, 2006 Auctions in SCM 16
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)?
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Jan 16, 2006 Auctions in SCM 17
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?
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Jan 16, 2006 Auctions in SCM 18
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
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Jan 16, 2006 Auctions in SCM 19
Collusive Approaches
•FCC Spectrum Auction–Applications to TAC
•Set-your-hair-on-fire Collusion
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Jan 16, 2006 Auctions in SCM 20
FCC spectrum auctionSimultaneous, 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
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Jan 16, 2006 Auctions in SCM 21
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)
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Jan 16, 2006 Auctions in SCM 22
Cost/benefit of collusion
• Cost: “Freedom” to bid on any auction you wish
• Benefit: “Protection” from the full costs of market competition
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Jan 16, 2006 Auctions in SCM 23
Bad news: prisoner’s dilemma
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Jan 16, 2006 Auctions in SCM 24
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)
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Jan 16, 2006 Auctions in SCM 25
Differences from SCM
• Auctions are sealed bid
• Winner and winning bid aren't announced
• Auctions close periodically
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Jan 16, 2006 Auctions in SCM 26
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
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Jan 16, 2006 Auctions in SCM 27
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
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Jan 16, 2006 Auctions in SCM 28
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
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Jan 16, 2006 Auctions in SCM 29
What if Collusion is illegal?
• Set-their-hair-on-fire collusion!– Our martyr agent tries to help another team
instead
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Jan 16, 2006 Auctions in SCM 30
Thanks!