Progressive Second Price Auction
The Progressive Second Price Auction (PSP) is a new mechanism for decentralized real-time allocation and pricing of shareable resources that are consumed in real time.
In a PSP auction, a seller posts an ask, i.e. offers a quantity of arbitrarily divisible resource (such as bandwidth), with a reserve (or asking) price per unit. Buyers submit bids, containing the quantity and the unit price they are willing to pay. Based on the received bids, the auctioneer computes the share of the offered quantity to be allocated to each buyer, and charges each a price which is no more (per unit) than that buyer's bid price. The auction can be run in various ways: real-time (instantaneous allocation); with bidding rounds where bidders are allowed to converge to an equilibrium before an auction closes; or with rounds closing at fixed or random time intervals.
Invisible Hand Networks' patent-pending PSP auction is a generalization of Vickrey-Clarke-Groves mechanisms to shareable resources, with a low signalling load, very low computational complexity, and real-time convergence to efficent equilibria where the resource allocation is always value-maximizing.
1. The PSP Auction theory is derived in: Design and Analysis of the Progressive Second Price Auction for Network Bandwidth Sharing, to appear in Telecommunication Systems, special issue on Network Economics.