Peer to Peer Transactions in Agent-mediated Electronic Commerce James E. Youll Submitted to the Program in Media Arts and Sciences, School of Architecture and Planning, In Partial Fulfillment of the Requirements for the Degree of Master of Science in Media Arts and Sciences at the Massachusetts Institute of Technology August 10, 2001 Abstract This thesis proposes a new approach to electronic markets that overcomes the shortcomings of existing electronic markets through software agent-driven, peer-to-peer, iterative negotiations. Contemporary electronic markets commonly capture both the customs and shortcomings of traditional practice. Rule-based and bound to traditional models, contemporary electronic markets are overly controlling, segregated, inflexible, weakly automated and fixated on price. Many prior attempts to interpose electronic exchanges in existing markets have failed or encountered resistance from traders. Traders’ resistance is interpreted here as a call for systems that bend to the will of traders while channeling self-interested actions toward healthy market practices. The Atomic Market is both a model for an agent-based, peer-to-peer marketplace, and a working system that shows the model in operation. The Atomic Market architecture defines a decentralized marketplace wholly controlled by traders through a new protocol for distributed negotiation. The demonstration system is a collection of independent software agents that pursue economic exchanges via the Atomic Market methodology. In the Atomic Market, multiple agents resolve their self-interests though cycles of rewriting a “contract” comprised of descriptive, flexible terms tailored to the needs of each trader. The Atomic Market interprets the Contract Net Protocol as a message-passing system for economic negotiations, in which agents conduct broad, parallel searches to discover opportunities and trading partners in an open marketplace. One of the first implementations of a decentralized, peer-to-peer agent marketplace, the Atomic Market brings together three features not found in contemporary e-commerce systems: decentralization, component-based transactions and open-ended outcomes. Buyers and sellers benefit from the exchange of detailed needs, offers, contingencies and external conditions as they define and negotiate both the substance and terms of a transaction. Thesis Supervisor Thesis Readers Dr. Pattie Maes Dr. Chrysanthos Dellarocas Associate Professor of Douglas Drane Career Development Media Arts and Sciences Assistant Professor of Management MIT Media Laboratory MIT Sloan School of Management Dr. Benjamin Grosof Assistant Professor of Information Technology MIT Sloan School of Management This research was funded by the Digital Life Consortium and E-Markets Special Interest Group at the MIT Media Laboratory, British Telecom, and MasterCard Corporation. © 2001 Massachusetts Institute of Technology. All rights reserved. 2 • PREFACE Notes This edition of Peer to Peer Transactions in Agent-mediated Electronic Commerce was modified for redistribution. It differs slightly from the document submitted to the Program in Media Arts and Sciences during August, 2001, which will be archived at MIT as the official submitted thesis. Specifically, this document has been altered for printing on single-sided laser printers, and for screen viewing. Blank pages have been removed, and the front matter and signature pages condensed. The table of contents has been re-rendered with single-spaced text. Bibliographic citations have been added to the preface. Finally, a copyright statement now appears in all page footers. Because of these changes, page numbers differ from those of the original thesis. This document is available online at: http://www.media.mit.edu/~jim/thesis/youll-thesis-2001-dist.pdf James E. Youll • Peer to Peer Transactions in Agent-mediated Electronic Commerce © 2001 Massachusetts Institute of Technology. All rights reserved. 3 • PREFACE BibTeX citation @MastersThesis{youll-masters-2001, author = {James E. Youll}, title = {Peer to Peer Transactions in Agent-mediated Electronic Commerce}, school = {Massachusetts Institute of Technology, MIT - Media Lab}, address = {Cambridge, MA}, year = {2001}, month = {September}, URL = {http://www.media.mit.edu/~jim/thesis/youll-thesis-2001-dist.pdf}, comment = {S.M. Thesis. Advisor: Pattie Maes}, abstract = {This thesis proposes a new approach to electronic markets that overcomes the shortcomings of existing electronic markets through software agent-driven, peer-to-peer, iterative negotiations. Contemporary electronic markets commonly capture both the customs and shortcomings of traditional practice. Rule-based and bound to traditional models, contemporary electronic markets are overly controlling, segregated, inflexible, weakly automated and fixated on price. Many prior attempts to interpose electronic exchanges in existing markets have failed or encountered resistance from traders. Traders resistance is interpreted here as a call for systems that bend to the will of traders while channeling self-interested actions toward healthy market practices. The Atomic Market is both a model for an agent-based, peer-to-peer marketplace, and a working system that shows the model in operation. The Atomic Market architecture defines a decentralized marketplace wholly controlled by traders through a new protocol for distributed negotiation. The demonstration system is a collection of independent software agents that pursue economic exchanges via the Atomic Market methodology. In the Atomic Market, multiple agents resolve their self-interests though cycles of rewriting a contract comprised of descriptive, flexible terms tailored to the needs of each trader. The Atomic Market interprets the Contract Net Protocol as a message- passing system for economic negotiations, in which agents conduct broad, parallel searches to discover opportunities and trading partners in an open marketplace. One of the first implementations of a decentralized, peer-to-peer agent marketplace, the Atomic Market brings together three features not found in contemporary e-commerce systems: decentralization, component-based transactions and open-ended outcomes. Buyers and sellers benefit from the exchange of detailed needs, offers, contingencies and external conditions as they define and negotiate both the substance and terms of a transaction.} } James E. Youll • Peer to Peer Transactions in Agent-mediated Electronic Commerce © 2001 Massachusetts Institute of Technology. All rights reserved. 4 • CONTENTS Contents CONTENTS..................................................................................................................................................................4 ACKNOWLEDGEMENTS ........................................................................................................................................9 1 INTRODUCTION...................................................................................................................................................12 Decentralization..................................................................................................................................................13 Component-based transactions ..........................................................................................................................13 Open-ended outcomes.........................................................................................................................................14 Motivation ...........................................................................................................................................................15 Contributions.......................................................................................................................................................15 Overview..............................................................................................................................................................16 2 ELECTRONIC MARKETS ..................................................................................................................................17 CONSTRAINTS, COMPLICATIONS AND OPPORTUNITIES IN ELECTRONIC MARKETS .................................................17 Too much control ................................................................................................................................................17 Segregation..........................................................................................................................................................18 Inflexibility ..........................................................................................................................................................18 Monolithic interaction models............................................................................................................................18 Weak automation.................................................................................................................................................19 Emphasis on price...............................................................................................................................................19 Disintermediation may not be such a great plan after all.................................................................................19 Moving beyond order execution .........................................................................................................................19