Bid Fees

Bid fees are a basic Merkato concept. They serve two purposes:

  1. They theoretically limit the length of auctions and prevent auction instability
  2. They provide a revenue stream for pure bandwidth The amount of data transmitted or received per unit of time. When we refer to acquiring or selling bandwidth, we mean the amount of information that can be sent over a connection at one time, at the allowed speed, without packet loss or excessive delay. Bandwidth is measured in bits-per-second. exchange “brokers”

Bid fees work as follows.

The Resource The bandwidth service that is offered through a single Merkato marketplace. It will have service attributes, an available quantity earmarked for it by the NSP, and a market mechanism for distributing bandwidth (either the spot market The Merkato mechanism by which bandwidth is traded, in a progressive second price auction. An optimal fair market price is established and bandwidth is allocated to buyers, based on their bids relative to other buyers. or reservation market The Merkato market mechanism by which a specified quantity of bandwidth, for a specific duration, is sold for a firm price specified by the seller and agreed to by the buyer. This is an automated process based on a rate sheet that the seller establishes in advance. ).agent The program that interacts with the rest of Merkato on behalf of buyers and sellers. Buyers can acquire bandwidth by configuring their agents to offer the price they are willing to pay for a range of available quantity, or use their agent to request a quote for a fixed-price bandwidth reservation. Sellers configure their agents with a quantity of bandwidth for sale and a minimum price they are willing to accept for that quantity. has pre-configured settings for the following values:

The fee for submitting a bid increases continuously throughout the auction. As the bid fee increases, it influences an agent’s behavior in two stages.

The first effect is that the agent does not submit a new bid if it appears that the bid fee outweighs the financial benefit of the bid. This can be considered a “soft limit” imposed by the bid fee.  

If the auction continues past this point, there is also a hard limit involved¾as soon as the bid fee reaches the maximum bid fee value, the auction is stopped and allocations are made based on the last bids received.

The Resource agent keeps track of the bid fee for each bidder. Each time it gets a bid from any bidder the Resource agent increments the bid fee and inform all bidders what the new value is. Every time the number of total bids reaches the configured “MaxNbids,” the bid fee increment is doubled.

Example:

If the initial bid fee increment is 1, and MaxNbids is 100, then the bid fee after the first bid is 1, after the second bid it is 2, and so on, until 100 bids are received. Thereafter the bid fee increment doubles, so that, following the next bid, the fee is 102, then 104, then 106, and so on. After 200 bids, the fee starts incrementing by 4 each bid, after 300 bids, by 8, and so on.

Use of the Bid Fee

In most Merkato installations, the bid fee is used to prevent unstable bidding patterns that keeping auctions running forever. The fee is not actually charged to customers. This is largely because the agent behavior is automated and customers have little or no control over the frequency at which their agents bid.

In the future, customers who use Merkato to run bandwidth exchanges may elect to charge the bid fee as a fee for their services.

Valuation Formulas

The formulas from which valuations are derived are provided below. You may wish to enter them into a spreadsheet to analyze them. Remember, these formulas determine what an agent bids, but the player’s actual cost is based on the market price The price for something that buyers and sellers agree on. Merkato establishes a market price for bandwidth during each spot market auction round. There is a fixed amount for sale, so as demand increases, prices rise. The market price is reached when the cumulative demand of all the buyers is exactly equal to the amount of bandwidth being offered by the seller. , as determined by progressive second price auction rules.

The curves defined by these formulas vary according to settings in the valuation The value a buyer or seller places on bandwidth. Setting a valuation is part of setting a purchasing strategy. Valuation settings within a buyer agent let buyers specify the amount they are willing to pay for varying amounts of bandwidth. This information is used by the agent to respond to changing market conditions during a Merkato progressive second price auction. windows. To avoid confusion, the names of the settings have been given in the formulas as:

·        Budget for budget settings in budget-based valuations

·        MaxQty for either Max Qty in Budget-with-limits or the single Qty setting in the other valuation windows

·        MinQty for the minimum quantity setting in the Budget-with-limits valuation

·        MaxValue for the Value setting in the valuation windows

The variables in the equations are:

·        Price for the unit price

·        Qty for the quantity of bandwidth that will be requested at that price

Note that the units do not matter as long as you are consistent throughout:

·        Budget is specified in currency-per-unit-time (such as $/month).

·        “Quantities” are quantities of bandwidth expressed in Gbps One of the ways of expressing units of bandwidth; Gigabits-per-second (1,000,000,000 bits-per-second)., Mbps One of the ways of expressing units of bandwidth-Megabits-per-second (1,000,000 bits-per-second)., or Kbps One of the ways of expressing units of bandwidth-kilobits-per-second (1,000 bits-per-second)..

·        Price is specified in currency per unit bandwidth per unit time (such as $/Mbps/Month).

·        MaxValue is given in terms of currency per unit time (such as $/month).

To convert price to cost, multiply by the quantity (“Qty” in the equations).