Check out the new USENIX Web site.

next up previous
Next: Bidder accountability Up: Accountability Previous: Accountability

Deposits

  In order to support non-repudiation, or at least to associate a cost with repudiation, bid submissions may include some electronic payment (e.g., digital cash) as a form of deposit. This is particularly useful in cases where there would be a difficulty holding the bidders accountable through a legal process (e.g., if the bidders are completely anonymous). The amount of the deposit may or may not depend on the value of the bid. If a bidder fails to accept the good, the deposit is forfeited and the auction is repeated. Depending on the particular payment system used for the deposit, some safe-guarding techniques may be used to prevent cheaters from redeeming deposits inappropriately. For example, verifiable signature sharing [6] may be used to require some threshold number of auctioneers to agree to redeem a digital cash deposit. The use of verifiable signature sharing and digital payment deposits on bids first appears in [7].

There is a cost associated with such deposits beyond the computational cost of the implementation. The deposit is ``in use'', and is unavailable for other purposes during the course of the auction. The precise effect of having some amount in use is dependent on the digital payment scheme being used. In an anonymous digital cash scheme, for example, it is likely to mean that the funds have been withdrawn from a (possibly interest bearing) account. In any scheme, there is an opportunity cost to having the funds in use which must be taken into account. If the overall opportunity cost to the bidders is high (e.g. if the deposit is large or if there are many bidders), this will tend to discourage bidding and depress the selling price. Therefore, compensation for the auctioneer and cost to the bidders must be balanced when choosing the value of the deposit.

One implementation on deposits is for the seller to set fixed value for all bidders as the penalty for default. The appropriate magnitude for this default penalty is highly dependent on the specific characteristics of the seller, the good, and the bidders. This method is optimal in terms of the computation and communication costs and may be the best in practice.

Another method, not detailed here, would be to have the deposit match the value of the bid. This would introduce further computational complexity, particularly since the auction is second-price and so determining the value of the deposit, even for the winning bidder, would violate privacy. An efficient method for such deposits is an open problem (see section 5) Even discounting the computational overhead, this method yields optimal results only if the total of opportunity costs of all deposits is trivial.



next up previous
Next: Bidder accountability Up: Accountability Previous: Accountability



Doug Tygar
Wed Jul 22 10:16:16 EDT 1998