DOCSLIB.ORG

A Fair and Secure Reverse Auction for Government Procurement

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
A Fair and Secure Reverse Auction for Government Procurement sustainability Article A Fair and Secure Reverse Auction for Government Procurement Chia-Chen Lin 1,*, Ya-Fen Chang 2, Chin-Chen Chang 3 and Yao-Zhu Zheng 4 1 Department of Computer Science and Information Engineering, National Chin-Yi University of Technology, Taichung 41170, Taiwan 2 Department of Computer Science and Information Engineering, National Taichung University of Science and Technology, Taichung 40401, Taiwan; [email protected] 3 Department of Information Engineering and Computer Science, Feng Chia University, Taichung 40724, Taiwan; [email protected] 4 Department of Computer Science, National Tsing Hua University, Hsinchu 30013, Taiwan; [email protected] * Correspondence: [email protected] Received: 21 August 2020; Accepted: 12 October 2020; Published: 16 October 2020 Abstract: With the development of e-commerce, the electronic auction is attracting the attention of many people. Many Internet companies, such as eBay and Yahoo!, have launched online auction systems. Many researchers have studied the security problems of electronic auction systems, but few of them are multi-attribute-based. In 2014, Shi proposed a provable secure, sealed-bid, and multi-attribute auction protocol based on the semi-honest model. We evaluated this protocol and found that it has some design weaknesses and is vulnerable to the illegal operations of buyers, which results in unfairness. In this paper, we improved this protocol by replacing the Paillier’s cryptosystem with the elliptic curve discrete (ECC), and we designed a novel, online, and multi-attribute reverse-auction system using the semi-honest model. In our system, sellers’ identities are not revealed to the buyers, and the buyers cannot conduct illegal operations that may compromise the fairness of the auction. Keywords: auction; government procurement; e-commerce; information security 1. Introduction In recent years, electronic commerce, also known as e-commerce, has developed quickly. More and more consumers prefer to shop on the Internet for convenience and other benefits. As a kind of e-commerce, e-auctions also have attracted much attention. Many Internet companies, such as eBay and Yahoo!, have launched online auction platforms. Many governments have also participated in online procurement auctions. However, most of them may partially digitalize the procedure of proposal collection. As for the determination of the final winner, either it is mainly proceeded by operators rather than the digitized and automated operation or the bids have not been properly protected so that bribing problems would occur in online government procurements. Based on whether they have opening bid prices, auctions can be classified into two types including sealed-bid auctions and open auctions [1]. Furthermore, open auctions can be classified into English auctions and Dutch auctions. In an English auction, the auctioneer publishes a basic price, and bidders openly submit their bids. The bid price should be higher than the basic price, and the auction will be terminated if no bidders submit a higher price. The bidder who submits the highest price wins the auction. In a Dutch auction, the auctioneer publishes a basic price at the beginning of the auction. If no one wishes to pay this price, the auctioneer decreases the price until some bidder accepts it, and this bidder becomes the winner. Sustainability 2020, 12, 8567; doi:10.3390/su12208567 www.mdpi.com/journal/sustainability Sustainability 2020, 12, x FOR PEER REVIEW 2 of 12 Based on the numbers of buyers and sellers, auctions can be classified into one-side auctions and doubleSustainability auctions2020 [2]., 12 ,In 8567 one-side auctions, there are several buyers in the auction for one seller or vice2 of 12 versa. The former situation is called a forward auction that is used commonly in antique auctions. In a reverse auction, there are multiple sellers for a single buyer, as shown in Figure 1b, which gives buyers aBased chance on to the find numbers the lowest-price of buyers seller. and sellers,This type auctions of auction can includes be classified governments into one-side that invite, auctions forand example, double tenders auctions for [2 ].the In one-sideconstruction auctions, of infrastructure. there are several As buyersfor the indouble the auction auction, for oneit is seller a combinationor vice versa. of forward The former and reverse situation auctions. is called In a ot forwardher words, auction in double that is auctions, used commonly there are in many antique buyersauctions. and sellers In a reverse in the process. auction, A there good are exam multipleple of a sellers double for auction a single is the buyer, stock as market. shown in Figure1b, whichBased gives on how buyers they a determine chance to find the winner, the lowest-price auctions seller.can be This classified type of into auction single-attribute includes governments auctions andthat multi-attribute invite, for example, auctions tenders [3,4]. In for a single-attrib the constructionute auction, of infrastructure. the price is As often for the the only double determinant auction, it is of thea combination auction. In ofmulti-attribute forward and reverseauctions, auctions. more determinants In other words, influence in double the results auctions, of therethe auction, are many suchbuyers as price, and the sellers quality in the of process.the product, A good the exampledelivery date, of a double and so auction on. is the stock market. FigureFigure 1. Different 1. Different kinds kinds of auctions: of auctions: (a) Forward (a) Forward auction, auction, (b) (Reverseb) Reverse auction auction and and (c) Double (c) Double auction. auction. ManyBased researchers on how they have determine studied security the winner, issues auctions in online can beauctions classified using into various single-attribute cryptographic auctions methods,and multi-attribute such as symmetrical auctions [encryptions3,4]. In a single-attribute and asymmetrical auction, encryptions, the price is different often the types only determinantof digital signatures,of the auction. such as In ring multi-attribute signature [5], auctions, message more authentication determinants codes, influence secret the sharing, results ofand the secure auction, multipartysuch as price,computation. the quality These of the methods product, are the intended delivery to date, solve and security so on. and other issues in online auctions,Many such researchersas the privacy have of bids, studied the securityprivacy of issues the bidders’ in online identities, auctions and using the various efficient cryptographic operation of themethods, auction. such However, as symmetrical most of these encryptions methods and are asymmetrical used to solve encryptions,the above issues diff erentof single-attribute types of digital auctions.signatures, Only sucha few as of ring the signaturerelated research [5], message results authentication are applicable codes,to problems secret sharing,in multi-attribute and secure auctionsmultiparty [6–9]. computation.In 2006, Suzuki These et al. [10] methods proposed are intendeda protocol to for solve multi-attribute security and auctions other issuesthat required in online a trustedauctions, authority. such as In the 2007, privacy Shih of et bids, al. [11] the proposed privacy of a themethod bidders’ with identities, a shared andhash the chain effi cientto deal operation with multipleof the auction.items in However,an online mostauction, of these but it methods was not are applicable used to solvefor multi-attribute the above issues auctions. of single-attribute In 2008, Parkesauctions. et al. [12] Only used a few homomorphic of the related encryption research in results a multiple-item are applicable auction to problems to protect in the multi-attribute privacy of theauctions bids. However, [6–9]. In 2006,it still Suzuki was not et al. suitable [10] proposed for multi-attribute a protocol for auctions. multi-attribute In 2009, auctions Xiong that et al. required [1] proposeda trusted a ring authority. signature-based In 2007, Shih auction et al. to [11 protect] proposed bidders’ a method identities with in a the shared forward hash auction, chain to but deal the with implementationmultiple items ofin their an onlineproposal auction, would butrequire it was a large not applicablecomputational for multi-attribute cost. In 2011, Srinath auctions. et al. In [13] 2008, proposedParkes etthe al. involvement [12] used homomorphic of a trusted third encryption party to in protect a multiple-item the privacy auction of bids. to protectHowever, the since privacy sealedof the bids bids. must However, be opened it still at the was end not of suitable the auct forion multi-attribute to compute a auctions.scoring function, In 2009, their Xiong privacy et al. [1] cannotproposed be fully a ring protected. signature-based Also in 2011, auction Srinath to protect et al. [14] bidders’ extended identities Parkes in et the al.’s forward [12] homomorphic auction, but the encryption-basedimplementation protocol of their proposalto a mult wouldi-attribute require protocol, a large but computational the auctioneer cost. still In had 2011, to Srinathopen the et bids al. [13 ] at proposedthe end theof the involvement auction. ofIn aother trusted words, third partythe privacy to protect of the the privacy bid with of bids. their However, method since is still sealed compromised.bids must be In opened 2012, at Xiong the end et of al. the [15] auction proposed to compute a revocable a scoring ring function, signature their to privacy protect cannot bidders’ be fully privacy,protected. but it Also was inproven 2011, Srinathto be vulnerable et al. [14] to extended DoS attack. Parkes In et2013, al.’s Chang [12] homomorphic et al. [5] proposed encryption-based a secure Englishprotocol auction to a multi-attributesystem with an protocol,on-shelf phase but the in auctioneer order to improve still had Xiong to open et al.’s the bids[15] atproposal, the end but of the theauction. new system In otherhad a words,linkability the defect privacy that of meant the bid the with attacker their could method link isdifferent still compromised.
Load more

Recommended publications
  • And Information Aggregation)
    Introduction to Auctions (and information aggregation) Saša Pekeč Decision Sciences The Fuqua School of Business Duke University October 29, 2008 Outline of the Topics •Scoring rules • Prediction markets • Auctions: clean and oversimplifying view • Auctions: messy but closer to reality • Information aggregation results Information Aggregation • Surveys • Opinion Polls • Aggregating votes / ratings / review scores / … • Eliciting and aggregating expert opinions … Issues: • info quantity • info quality • representativeness • incentives Single Data Point Info Quality •stats • machine learning Add incentives: Example: Binary event E (thumbs up/down, yes/no, 0/1) Elicit probability estimate of E=1: p. Brier score: B(p)= 1-(E-p)2 If r reported instead of p: E[B(r)|p]= p(1-(1-r)2)+(1-p)(1-r2) maximized at r=p ( d/dr : 2p(1-r)-2(1-p)r ) Truthful reporting maximizes Brier score Scoring Rules • Consider a probability forecast for a discrete event with n possible outcomes (“states of the world”). • Let ei = (0, ..., 1, ..., 0) denote the indicator vector for the ith state (where 1 appears in the ith position). • Let p = (p1, ..., pn) denote the forecaster’s true subjective probability distribution over states. • Let r = (r1, ..., rn) denote the forecaster’s reported distribution (if different from p). (Also, let q = (q1, ..., qn) denote a baseline distribution upon which the forecaster seeks to improve.) Slide thx to R.Nau Proper Scoring Rules • The scoring rule S is [strictly] proper if S(p) ≥ [>] S(r, p) for all r [≠p], i.e., if the forecaster’s expected score is [uniquely] maximized when she reports her true probabilities.
    [Show full text]
  • Auctioning One Item
    Auctioning one item Tuomas Sandholm Computer Science Department Carnegie Mellon University Auctions • Methods for allocating goods, tasks, resources... • Participants: auctioneer, bidders • Enforced agreement between auctioneer & winning bidder(s) • Easily implementable e.g. over the Internet – Many existing Internet auction sites • Auction (selling item(s)): One seller, multiple buyers – E.g. selling a bull on eBay • Reverse auction (buying item(s)): One buyer, multiple sellers – E.g. procurement • We will discuss the theory in the context of auctions, but same theory applies to reverse auctions – at least in 1-item settings Auction settings • Private value : value of the good depends only on the agent’s own preferences – E.g. cake which is not resold or showed off • Common value : agent’s value of an item determined entirely by others’ values – E.g. treasury bills • Correlated value : agent’s value of an item depends partly on its own preferences & partly on others’ values for it – E.g. auctioning a transportation task when bidders can handle it or reauction it to others Auction protocols: All-pay • Protocol: Each bidder is free to raise his bid. When no bidder is willing to raise, the auction ends, and the highest bidder wins the item. All bidders have to pay their last bid • Strategy: Series of bids as a function of agent’s private value, his prior estimates of others’ valuations, and past bids • Best strategy: ? • In private value settings it can be computed (low bids) • Potentially long bidding process • Variations – Each agent pays only part of his highest bid – Each agent’s payment is a function of the highest bid of all agents • E.g.
    [Show full text]
  • UNCITRAL Considers Electronic Reverse Auctions, As Comparative Public Procurement Comes of Age in the U.S
    GW Law Faculty Publications & Other Works Faculty Scholarship 2005 UNCITRAL Considers Electronic Reverse Auctions, as Comparative Public Procurement Comes of Age in the U.S. Christopher R. Yukins George Washington University Law School, [email protected] Don Wallace Jr. Follow this and additional works at: https://scholarship.law.gwu.edu/faculty_publications Part of the Government Contracts Commons Recommended Citation Christopher R. Yukins & Don Wallace Jr., UNCITRAL Considers Electronic Reverse Auctions, as Comparative Public Procurement Comes of Age in the U.S., Pub. Procurement L. Rev. (2005). This Article is brought to you for free and open access by the Faculty Scholarship at Scholarly Commons. It has been accepted for inclusion in GW Law Faculty Publications & Other Works by an authorized administrator of Scholarly Commons. For more information, please contact [email protected]. UNCITRAL Considers Electronic Reverse Auctions, as Comparative Public Procurement Comes of Age in the U.S. Christopher R. Yukins Don Wallace, Jr.1 The United Nations Commission on International Trade Law (UNCITRAL) is revising the UNCITRAL Model Procurement Law, to reflect emerging practices in procurement. That effort, it is hoped, will yield real benefits for emerging nations that rely on the UNCITRAL model law to shape their procurement systems. In late January 2005, as part of that reform effort, the UNCITRAL Secretariat hosted a meeting of international experts in Vienna, Austria, to discuss how electronic auctions should be handled under the Model Law, and to assess the concomitant problem of unrealistically low pricing (known in the European system as "abnormally low bids"). In April 2005, an UNCITRAL working group of representatives from around the world met to develop proposed changes to the UNCITRAL Model Law.2 These efforts will, it is hoped, lead to 1 Christopher Yukins ([email protected]) is an associate professor of government contracts law at The George Washington University Law School, and Don Wallace, Jr.
    [Show full text]
  • English and Vickrey Auctions
    CHAPTER ONE English and Vickrey Auctions I describe a bit of the history of auctions, the two pairs of standard auction forms, and the ideas of dominance and strategic equivalence. 1.1 Auctions It is hard to imagine modern civilization without buying and selling, which make possible the division of labor and its consequent wealth (Smith, 1776). For many common and relatively inexpensive commodi­ ties, the usual and convenient practice at the retail level, in the West anyway, is simply for the seller to post a take-it-or-leave-it price, and for the prospective buyer to choose what to buy and where to buy it, perhaps shopping for favorable prices. I haven’t tried haggling over price at a Wal-Mart, but I can’t imagine it would get me very far. For some big-ticket items, however, like houses and cars, haggling and counteroffers are expected, even in polite society, and bargaining can be extended over many rounds. In some cultures, haggling is the rule for almost all purchases. A third possibility, our subject here, is the auction, where many prospective buyers compete for the opportunity to purchase items, either simultaneously, or over an extended period of time. The main attraction of the auction is that it can be used to sell things with more or less uncertain market value, like a tractor in a farmer’s estate, a manufacturer’s overrun of shampoo, or the final working copy of Beethoven’s score for his Ninth Symphony (see fig. 1.1). It thus promises to fetch as high a price as possible for the seller, while at the same time offering to the buyer the prospect of buying items at bargain prices, or perhaps buying items that would be difficult to buy in any other way.
    [Show full text]
  • Reverse Auction in Pricing Model by Nagabhushan.S.V, Praveen Kulkarni, Dr.K.N
    Global Journal of Computer Science and Technology Volume 12 Issue 7 Version 1.0 April 2012 Type: Double Blind Peer Reviewed International Research Journal Publisher: Global Journals Inc. (USA) Online ISSN: 0975-4172 & Print ISSN: 0975-4350 Reverse Auction in Pricing Model By Nagabhushan.S.V, Praveen kulkarni, Dr.K.N. Subramanya & Dr.G.N.Srinivasan R V College of Engineering Abstract - Dynamic price discrimination adjusts prices based on the option value of future sales, which varies with time and units available. This paper surveys the theoretical literature on dynamic price discrimination, and confronts the theories with new data from airline pricing behavior, Consider a multiple booking class airline-seat inventory control problem that relates to either a single flight leg or to multiple flight legs. During the time before the flight, the airline may face the problems of (1) what are the suitable prices for the opened booking classes, and (2) when to close those opened booking classes. This work deals with these two problems by only using the pricing policy. In this paper, a dynamic pricing model is developed in which the demand for tickets is modeled as a discrete time stochastic process. An important result of this work is that the strategy for the ticket booking policy can be reduced to sets of critical decision periods, which eliminates the need for large amounts of data storage. Keywords : Bidding, dynamic pricing, electronic markets, group-buying discounts, Internet based selling, market microstructure, online retailing, pricing mechanism. GJCST Classification: K.4.4 Reverse Auction in Pricing Model Strictly as per the compliance and regulations of: © 2012.
    [Show full text]
  • An Experimental Study of the Generalized Second Price Auction
    An experimental study of the generalized second price auction. Jinsoo Bae John H. Kagel The Ohio State University The Ohio State University 6/18/2018 Abstract We experimentally investigate the Generalized Second Price (GSP) auction used to sell advertising positions in online search engines. Two contrasting click through rates (CTRs) are studied, under both static complete and dynamic incomplete information settings. Subjects consistently bid above the Vikrey-Clarke-Grove’s (VCG) like equilibrium favored in the theoretical literature. However, bidding, at least qualitatively, satisfies the contrasting outcomes predicted under the two contrasting CTRs. For both CTRs, outcomes under the static complete information environment are similar to those in later rounds of the dynamic incomplete information environment. This supports the theoretical literature that uses the static complete information model as an approximation to the dynamic incomplete information under which advertising positions are allocated in field settings. We are grateful to Linxin Ye, Jim Peck, Paul J Healy, Kirby Nielsen, Ritesh Jain for valuable comments. This research has been partially supported by NSF grant SES Foundation, SES- 1630288 and grants from the Department of Economics at The Ohio state University. Previous versions of this paper were reported at the 2017 ESA North American Meetings in Richmond, VA. We alone are responsible for any errors or omissions in the research reported. 1 1. Introduction Search engines such as Google, Yahoo and Microsoft sell advertisement slots on their search result pages through auctions, among which the Generalized Second Price (GSP) auction is the most prevalent format. Under GSP auctions, advertisers submit a single per-click bid.
    [Show full text]
  • Optimal Double Auction
    Optimal Double Auction Alex Boulatov1, Terrence Hendershott2, and Dmitry Livdan3 1Center for Advanced Studies, Higher School of Economics, Moscow. email: [email protected]. 2Haas School of Business, University of California, Berkeley. email: [email protected]. 3Haas School of Business, University of California, Berkeley. email: [email protected]. Optimal Double Auction [Very Preliminary] Abstract We consider a private value double-auction model which can be viewed as an extension of the model of Riley and Samuelson (1981) to the case of multiple sellers. Each seller has one unit of the same asset for sale and buyers compete to purchase one unit of the asset from one of the sellers. In the model sellers costlessly adjust their reserve prices, while sequentially moving buyers optimally choose between sellers to maximize their respective expected payoffs. The reserve price plays the role of a choice variable in the model, for both types of players. The refinement we propose in this paper is based on the following trade-off. From the sellers' perspective the probability of selling the good is increasing in the number of buyers bidding for it and, therefore, sellers have the incentive to decrease their reserve price to attract more buyers. From buyers' perspective, the probability of winning the auction decreases in the number of buyers and therefore buyers with higher private valuations are better off choosing sellers with slightly higher reserve price but fewer number of buyers. We exploit this trade-off to construct the symmetric Nash equilibrium in pure strategies in this double auction. Our first result is that such equilibrium exists and it is unique in the case of two sellers and the even number of buyers and it does not exist when the number of buyers is odd.
    [Show full text]
  • REVERSE AUCTIONS: the WAY EVERYONE WINS the SIMPLE ECONOMICS of LIVE PRICING a White Paper by Scout RFP
    REVERSE AUCTIONS: THE WAY EVERYONE WINS THE SIMPLE ECONOMICS OF LIVE PRICING a white paper by Scout RFP 1 EXECUTIVE SUMMARY Reverse auctions help organizations successfully realize cost-savings without sacrificing quality and supplier relations. For years, they have been a vital piece of the strategic sourcing suite. Despite this, many enterprises have yet to use reverse auctions to their greatest potential. In some cases, sourcing professionals haven’t explored the benefits of reverse auctions and as such have not embraced the methodology. Others have — often valid — concerns about the process. The reality, however, is that using reverse auctions for the right categories drives better business value. To better understand enterprise reverse auctions, we surveyed over 100 sourcing, procurement, and finance professionals from around the world. After compiling their experiences and opinions, we emerged with several conclusions about reverse auctions — from the business world’s perception of them to their wide-ranging capabilities. KEY TAKEAWAYS • Adoption of reverse auctions is rising. They’re most popular among A) large enterprises, both public and private, and B) Millennials and younger GenXers. • Reverse auctions make a bottom-line impact across the enterprise through their ability to increase the efficiency and efficiency of the sourcing department. • Enterprises that successfully run reverse auctions prioritize high quality for a good price, rather than automatically awarding to the lowest bidder. • Successful reverse auctions are run in a buyer’s market to source commodities, simple services, and other items with a low cost of changing. • Collaboration and transparency — two keys factors that contribute to a successful reverse auction — can only be achieved by running the auction through technology that adequately supports it.
    [Show full text]
  • Arxiv:1607.05139V1
    SBBA: a Strongly-Budget-Balanced Double-Auction Mechanism Erel Segal-Halevi, Avinatan Hassidim, and Yonatan Aumann Bar-Ilan University, ramat-gan 5290002, Israel, {erelsgl,avinatanh,yaumann}@gmail.com Abstract. In a seminal paper, McAfee (1992) presented the first dom- inant strategy truthful mechanism for double auction. His mechanism attains nearly optimal gain-from-trade when the market is sufficiently large. However, his mechanism may leave money on the table, since the price paid by the buyers may be higher than the price paid to the sell- ers. This money is included in the gain-from-trade and in some cases it accounts for almost all the gain-from-trade, leaving almost no gain-from- trade to the traders. We present SBBA: a variant of McAfee’s mechanism which is strongly budget-balanced. There is a single price, all money is exchanged between buyers and sellers and no money is left on the ta- ble. This means that all gain-from-trade is enjoyed by the traders. We generalize this variant to spatially-distributed markets with transit costs. Keywords: mechanism design · double auction · budget balance · social welfare · gain from trade · spatially distributed market 1 Introduction In the simplest double auction a single seller has a single item. The seller values the item for s, which is private information to the seller. A single buyer values the item for b, which is private to the buyer. If b>s, then trade can increase the utility for both traders; there is a potential gain-from-trade of b − s. However, there is no truthful, individually rational, budget-balanced mechanism that will perform the trade if-and-only-if it is beneficial to both traders.
    [Show full text]
  • Seeding the Market: Auctioned Put Options for Certified Emission Reductions
    policy brief NICHOLAS INSTITUTE FOR ENVIRONMENTAL POLICY SOLUTIONS NI PB 11-06 | August 2011 | nicholasinstitute.duke.edu Seeding the Market Auctioned Put Options for Certified Emission Reductions William A. Pizer, Sanford School of Public Policy and Nicholas Institute for Environmental Policy Solutions, Duke University This policy brief lays out arguments for the auctioned on underserved regions or the most desirable types of put option as a pay-for-performance mechanism that projects. The E.U., for example, is phasing out industrial would allow governments or philanthropic organiza- gas projects and focusing on projects only in the poorest tions to support and catalyze markets for greenhouse countries (Allen 2011; Twidale 2011). Alternatively, one gas emission reductions. The existing offset market, could focus on REDD+ credits, which are an important with its detailed methodologies for calculating emission area of interest for future emissions trading but are cur- reductions, offers tools that could be borrowed by such a rently excluded from virtually all trading systems. mechanism. Auctioned put options could target a subset of Clean Development Mechanism (CDM) projects— At the same time arguments are emerging for public segregated by type of project or country of origin—or an finance to support emission markets on the demand side, entirely different set of activities, such as REDD+.1 The public-sector fiscal constraints and an increasing focus key element is that there must be standardized rules (or on results are creating supply-side pressure. Pay-for- the promise of rules) detailing how emission reductions performance mechanisms allow governments to identify get counted and certified.
    [Show full text]
  • 1. Introduction (A) Double Auction: Any Procedure in Which Buyers And
    1. Introduction (a) double auction: any procedure in which buyers and sellers interact to arrange trade. i. contrast with the passive role of the seller in most auction models ii. can be dynamic or one shot; most theory focuses on one-shot procedures, but most experimental work has focused on dynamic procedures (b) What are the main issues and motivations? i. experimental evidence dating from the 1960s (V. Smith, inspired by E. Chamberlin’s classroom experiments at Harvard) A. "clearinghouse" (one-shot) versus continuous time ii. price discovery vs. price verification (R. Wilson, Reny and Perry (2006)): where do prices come from? iii. M. A. Satterthwaite: strategic behavior is a problem in small markets but not in large markets, and it doesn’t require a lot of traders for a market to be large A. Myerson-Satterthwaite B. Gibbard-Satterthwaite iv. market design A. design of algorithms for computerized trading B. in parallel to the use of auction theory to inform the design of auctions C. Budish, Cramton and Shim (2014) D. Loertscher and Mazzetti (2014), "A Prior-Free Approximately Optimal Dominant-Strategy Double Auction" 2. Elementary model of a static double auction: independent, private values (a) Chatterjee and Samuelson (1983) in the bilateral case (b) buyers, each of whom wishes to buy at most one unit of an in- divisible good, sellers, each of whom has one unit of the good to sell (c) redemption value/cost: [ ], v , [ ], v . Here, for simplicity, [ ]=[ ]=[0∈ 1] ∈ (d) for [0 1], -double auction in bilateral case: ∈ i. bid ,ask ii. trade iff at price +(1 ) ≥ − iii.
    [Show full text]
  • Auctioning of EU ETS Phase II Allowances: How and Why? 137
    Auctioning of EU ETS phase II allowances: how and why? 137 RESEARCH ARTICLE www.climatepolicy.com Auctioning of EU ETS phase II allowances: how and why? Cameron Hepburn1*, Michael Grubb2, Karsten Neuhoff 2, Felix Matthes3, Maximilien Tse4 1 St Hugh’s College, Environmental Change Institute and Department of Economics, St Margaret’s Road, Oxford OX2 6LE, UK 2 Faculty of Economics, Cambridge University, Sidgwick Avenue, Cambridge CB3 9DE, UK 3 Öko-Institut, Büro Berlin, Novalisstrasse 10, D-10115 Berlin, Germany 4 Nuffield College, New Road, Oxford OX1 1NF, UK Abstract The European Directive on the EU ETS allows governments to auction up to 10% of the allowances issued in phase II 2008–2012, without constraints being specified thereafter. This article reviews and extends the long- standing debate about auctioning, in which economists have generally supported and industries opposed a greater use of auctioning. The article clarifies the key issues by reviewing six ‘traditional’ considerations, examines several credible options for auction design, and then proposes some new issues relevant to auctioning. It is concluded that greater auctioning in aggregate need not increase adverse competitiveness impacts, and could in some respects alleviate them, particularly by supporting border-tax adjustments. Auctioning within the 10% limit might also be used to dampen price volatility during 2008–2012 and, in subsequent periods, it offers the prospect of supporting a long-term price signal to aid investor confidence. The former is only possible, however, if Member States are willing to coordinate their decision-making (though not revenue-raising) powers in defining and implementing the intended pricing mechanisms.
    [Show full text]