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Design of Multiunit Electronic Exchanges Through Decomposition

Dayama, Pankaj and Narahari, Y (2006) Design of Multiunit Electronic Exchanges Through Decomposition. In: IEEE Transaction on Automation Science and Engineering, 4 (1). pp. 67-74.

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In this paper, we exploit the idea of decomposition to match buyers and sellers in an electronic exchange for trading large volumes of homogeneous goods, where the buyers and sellers specify marginal-decreasing piecewise constant price curves to capture volume discounts. Such exchanges are relevant for automated trading in many e- business applications. The problem of determining winners and Vickrey prices in such exchanges is known to have a worst-case complexity equal to that of as many as (1+m+n) NP-hard problems, where is the number of buyers and is the number of sellers. Our method proposes the overall exchange problem to be solved as two separate and simpler problems: 1) forward auction and 2) reverse auction, which turns out o be generalized knapsack problems. In the proposed approach, we first determine the quantity of units to be traded between the sellers and the buyers using fast heuristics developed by us. Next, we solve a forward auction and a reverse auction using fully polynomial time approximation schemes available in the literature. The proposed approach has worst-case polynomial time complexity and our experimentation shows that the approach produces good quality solutions to the problem.

Item Type: Journal Article
Publication: IEEE Transaction on Automation Science and Engineering
Publisher: IEEE
Additional Information: Copyright 2007 IEEE. Personal use of this material is permitted. However, permission to reprint/republish this material for advertising or promotional purposes or for creating new collective works for resale or redistribution to servers or lists, or to reuse any copyrighted component of this work in other works must be obtained from the IEEE.
Keywords: Multi-unit exchanges;marginal-decreasing piecewise constant bids;volume discounts;forward auction;reverse auction; generalized knapsack problem.
Department/Centre: Division of Electrical Sciences > Computer Science & Automation
Date Deposited: 22 Aug 2008
Last Modified: 24 Jan 2012 04:58
URI: http://eprints.iisc.ac.in/id/eprint/11410

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