The “Max Qty” setting in the Budget Valuation with Limits and the “Qty” settings in the Square Root, Linear, Parabolic, and Logarithmic valuations constrain your agent to purchase no more than the quantity entered. Using this parameter to buy only the amount of bandwidth you need lowers your cost for two reasons:
1. Simple mathematics; Once the market price has been established, if you purchase less bandwidth, you will pay less in total cost.
2. Requesting less bandwidth will often lower the market price for everyone. In Merkato, market price is driven by demand. If all bidders begin their bidding by asking for all the bandwidth the seller has available, the market price is driven up as buyers bid and re-bid in an effort to win an allocation. If a bidder initially asks for a small fixed quantity at a high price, however, they essentially “take that bandwidth off the top” and the other bidders will contend for what is left.
Example:
If 5 bidders, each with a budget of $5000, bid for a total of 100 Mbps, each would receive an allocation of 20 Mbps at a market price of $250/Mbps. If one bidder decided that 20 Mbps was too much and used the Budget Valuation with Limits to set a maximum quantity of 15 Mbps, demand would drop. The market price would drop to $235 for everyone. The dropping bidder would pay a total cost of $3,530 for the 15 Mbps (as opposed to $5,000 for 20 Mbps the bidder didn’t really need). Of course, the other bidders would benefit from the market price drop as well. However, their benefit would be in the form of increased allocation rather than decreased cost. They would each receive 21.25 Mbps for their $5,000 budget.