Negotiation

  Given the enormous number of potential goods and the dynamic conditions of the marketplace, there is a concomitant need for a variety of negotiation mechanisms. For example, if a seller has a monopoly good in the current marketplace, the same good would be sold under very different terms than in a more competitive marketplace.

Auctions, which are simply a set of rules for determining a price and/or allocation based on a bidding protocol [16], provide a very flexible negotiation framework--each different auction institution can have a large effect on trading outcome. In effect, auctions are just another service--they provide matching and price setting for buyers and sellers. Auctions also promote automated negotiation through the following characteristics:

• Mediated
  Every buyer does not have separately find and contact every seller.
• Price, not barter
  Price minimizes and simplifies communication.
• Formal
  Standardized, structured offers and auction rules simplify communication as well as processing of offers.

We capture information about the different auction rules and protocols in a compact, reusable manner by using parameterized auction descriptions [18,25]. For example, an auction's attributes include how often it clears, its price determination rules (e.g., first price, second price), the allowed number of buyers and sellers, as well as what information is publicly available. A Vickrey auction can be described as having a price determination rule of second price, many buyers and one seller, and where the publicly available information does not include the bids (since it is sealed-bid). By changing these kind of auction parameters, we would expect to get a wide variety of behaviors and outcomes. These parameterized auction descriptions provide a description language, or standard vocabulary, for auctions.