Agents are programs within Merkato that interact on behalf of buyers and sellers. Buyers can acquire bandwidth by configuring their agents with the price they are willing to pay for a range of available quantity, or with the reservation they want. Sellers configure their agents with a quantity of bandwidth for sale and a minimum price for that quantity. Buyer agents then express what they are willing to pay for bandwidth in the form of bids, consisting of a unit price and a quantity.
Sellers create a price floor by offering to purchase their own bandwidth at the lowest price they consider acceptable.
The Merkato market responds to bids with proposed allocations and pricing. The buyer and seller agents can either accept the proposed allocation (by not bidding further), or reject the proposed allocation (by submitting another bid). When there is no more bidding, the auction closes, and Merkato makes bandwidth allocations.
The auction process typically takes no more than five minutes. The auction is completely open and fair, with all bidders seeing what other bidders have offered. The Progressive Second Price auction mechanism (see “Merkato Auction Mechanism: The Progressive Second Price Auction”) ensures that all bidders receive their allocations at the fair market price, which is equal to or less than the price they offer.