Commodity trading using an agent-based iterated double auction

This paper describes a new agent-based market mechanism for commodity trading via the Internet. This institution combines the best properties of the continuous double auction and the call auction, but does not suffer from their disadvantages. The institution consists of a marketplace, and a set of agents representing the participants. The agents enter into negotiation with each other in a series of double auctions, and through this determine the equilibrium price of the marketplace. When the equilibrium price has been found, all trades take place at this price. In the paper, we firstly introduce the concepts of supply and demand, and present the double auction and call auction market institutions. We discuss the advantages and disadvantages of each. We then present the agent-based iterated double auction, and discuss security features that can be incorporated in it. We give one possible implementation of the agent-based iterated double auction, using the PS agents of Preist and van To1 [12], and demonstrate that it can quickly determine the equilibrium price of the market. Finally, we discuss related and further work.

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