Merkato allows you to select between two strategies for pricing 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. on the spot market The Merkato mechanism by which bandwidth is traded, in a progressive second price auction. An optimal fair 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. is established and bandwidth is allocated to buyers, based on their bids relative to other buyers. : dynamic and static.
The static strategy is Merkato’s basic mode of operation. This strategy is based on the second price auction mechanism¾the successful bidder obtains the item being auctioned at a price based on the amount offered by the highest unsuccessful bidder. In the case of bandwidth, this is the price offered by the highest losing bids for the same amount of bandwidth the buyer receives. If the total amount of bandwidth requested by the losing bidder is less than that of the successful bidder, the difference is made up using the floor price The lowest price the seller will accept for bandwidth. The seller can establish the floor price through the Seller agent.. (See Merkato Auction Mechanism: The Progressive Second Price Auction.)
The disadvantage of this selling strategy is that, because buyers are allowed to bid many times during an auction cycle, until they are satisfied with their allocation An amount of bandwidth available for your use. Depending on the type of service being offered through Merkato, this can represent the maximum bandwidth available to you or a minimum guarantee of bandwidth available to you. , there are rarely any unsuccessful bidders. Using this method, virtually every auction would close at the floor price. Merkato solves this problem by offering the option to base pricing on the lowest successful bid rather than the highest unsuccessful ones. This is the dynamic strategy.
This alternative pricing paradigm is created without changing the auction rules used under the static selling strategy. Under the dynamic selling strategy, an 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. you create bids for all the bandwidth at a price high enough to just barely lose. Since the highest losing bid is the price everyone pays, this agent creates the basis for the pricing for all bidders in the “second price” auction. Since the dynamic seller bids barely below the price offered for the last unit of bandwidth, it never purchases bandwidth itself. (It will, however, purchase bandwidth to maintain the floor price, if necessary.) The action of the dynamic seller can be monitored in the auction graph and auction table in the desktop interface. (See Auction Graph and Auction Table.)