Defining the Bandwidth Marketplace

Answer the following questions to define the Merkato bandwidth marketplace.

• How much bandwidth do you want to release to the market?  The price of bandwidth sold in the Merkato system varies according to the level of demand. You can stimulate demand by reducing amount of bandwidth you make available. Of course, you sell less total bandwidth this way. At the other extreme, if available bandwidth always exceeds demand, the market price remains at your floor price. You can specify the amount of bandwidth to be sold on the Spot market and on the Reservation market separately. In the Spot market, you can adjust the capacity at any time via an Agent interface. Changing the capacity of the Reservation market requires contacting your Merkato administrator.
• What pricing levels do you want to create for the Reservation market?  Your administrator sets the prices on the Reservation market using a rate table you dictate. You can set pricing based on the amount of bandwidth the buyer requests and on the length of time for which the buyer requests it. The table uses price points that you define. By default, Merkato 2.3 supports four time levels and five quantity levels (a total of 20 price points), but this can be increased. You also specify a cancellation fee. The cancellation fee is a percentage of the remaining value of the contract, charged if the buyer terminates a reservation prematurely.
• What floor price do you want to set for the Spot market? In the Spot market, bidding for bandwidth always begins at the floor price you set. This price is configured dynamically via an agent you control. Changes take effect at the start of the next round of bidding.
• Do you want to create buy-back agents to automatically control the supply of bandwidth?  Buy-back agents have the effect of dynamically releasing bandwidth to the marketplace at fixed price points. These artificial buyers bid at certain price points and quantity levels and “win” the bandwidth until they are outbid by true buyers. (You should reveal this to the real customers so that they do not feel you are unfairly manipulating the market.)
• Do you wish buyers to access Spot and Reservation markets through a single agent or through separate agents?  Normally, users use a single username and password to access both the Spot and Reservation agents. The buyer selects the agent to download from either the Spot garage or the Reservation garage. Alternatively, both agents can be kept in the same garage, but must be accessed via different usernames. (These usernames should be chosen to indicate which market they apply to.) The convenience of logging in with a single username may outweigh the slight inconvenience of selecting the proper garage—this is your choice.
• How often would you like spot market auctions to be run? By default, spot market auctions run as often as possible¾every five minutes or so. We recommend running auctions as often as possible to provide buyers with the fastest possible response time to their changes. If, for some reason, you want to run auctions less often, your Merkato administrator can increase the pause time between auctions. By default, the pause time is just long enough to allow allocations to be configured in the network before the next auction starts. Pause time can be increased to lengthen the time between auctions. When you lengthen the time between the auctions, the auctions themselves last for the same duration.

Configuring many of these options is discussed in “Merkato Auction Mechanism: The Progressive Second Price Auction.”