Information Technology Reference
In-Depth Information
Trading Strategies for Markets: A Design Framework
and Its Application
P. Vytelingum, R.K. Dash, M. He, A. Sykulski, and N.R. Jennings
School of Electronics and Computer Science, University of Southampton,
Southampton, SO17 1BJ, UK
pv03r@ecs.soton.ac.uk
Abstract.
In this paper, we present a novel multi-layered framework for design-
ing strategies for trading agents. The objective of this work is to provide a frame-
work that will assist strategy designers with the different aspects involved in de-
signing a strategy. At present, such strategies are typically designed in an ad-hoc
and intuitive manner with little regard for discerning best practice or attaining re-
usability in the design process. Given this, our aim is to put such developments
on a more systematic engineering footing. After we describe our framework, we
then go on to illustrate how it can be used to design strategies for a particular type
of market mechanism (namely the Continuous Double Auction), and how it was
used to design a novel strategy for the Travel Game of the International Trading
Agent Competition.
1
Introduction
The last decade has seen a significant change in the nature of electronic commerce with
the emergence of economic software agents [11]: rational players that are capable of
autonomous and flexible actions to achieve their objectives [12] and that are endowed
with sophisticated strategies for maximising utility and profit on behalf of their human
owners. Today, electronic trading markets
1
allow access to a plenitude of information
that enables such software agents to be more informed and respond more efficiently
than humans could ever hope to. Now, such trading markets are governed by protocols
that define the rules of interaction amongst the economic agents. In some cases, these
protocols have a clearly optimal strategy. For example in the Vickrey auction, the best
strategy is to reveal one's true valuation of the item and for English auctions it is to bid
up to one's true valuation in small increments. However, in other settings, the analyses
yielding these best strategies often make use of a range of restrictive assumptions; rang-
ing from analysing the market in isolation (i.e. not taking into account dependencies on
other related markets), to assumptions on the agent behaviour (such as perfect and com-
plete information availability). Furthermore, several of the standard market mechanisms
have been modified or certain complex mechanisms may have been implemented such
that an analytical approach cannot yield a best strategy. For example, in eBay auctions
2
1
An electronic trading market is here defined as an online institution in which there is an ex-
change of resources or services using a currency as the trading token. Such markets range from
auctions, to supply chains, to barter systems.
2
www.ebay.com
