Data processing: financial – business practice – management – or co – Automated electrical financial or business practice or... – Finance
Reexamination Certificate
1998-08-07
2001-09-04
Millin, V. (Department: 2164)
Data processing: financial, business practice, management, or co
Automated electrical financial or business practice or...
Finance
C705S035000
Reexamination Certificate
active
06285989
ABSTRACT:
FIELD OF THE INVENTION
The present invention relates to the use of networked computer systems for the design and deployment of an on-line trading market.
BACKGROUND OF THE INVENTION
The Backdrop of Electronic Commerce
Technological advances in electronic commerce (e-commerce) solutions have revolutionized the way business is conducted. The popular explosion of the Internet, the ubiquity of the browser, the network infrastructure and the e-commerce solutions that glue these technologies together, have led to several developments:
new channels for buying and selling have emerged over the Internet,
buyers and sellers are more accessible to each other then ever before,
commodities as well as non-commodities can now be bought and sold at variable prices, determined by the buyer's willingness to pay and the seller's willingness to accept.
These dynamics are driving towards the creation of new and more efficient online markets that employ auction methodologies. The design, implementation and maintenance of auction solutions for these markets require sophisticated software technology.
Background on Auction Theory and Practice
The following is a brief introduction to various conventional auction settings and methods, starting with “low-end” auctions and concluding with “high-end” ones.
(1) Setting: Single seller, multiple buyers. Methods: The four well-known basic types are English auction, Dutch auction, first price sealed-bid auction, and second-price sealed-bid auction. These auctions and related ones have been well studied and continue to be so.
(2) Setting: Single seller, multiple units of goods. Methods: Auctions for such situations are only slightly more complex, but essentially are a natural generalization of the first kinds of auction.
(3)Setting: Multiple buyers and sellers. Methods: Variety of double auctions. In some cases the previous methods extend well, in others not at all (see below).
(4) Setting: Multiple buyers and sellers interacting repeatedly. Methods: Continuous Double Auctions, prime examples of which are the financial and commodity exchanges.
(5) Setting: Multiple goods with complementarities and substitutabilities. Methods: Vary. In any of the above settings, if multiple goods are sold whose values interact (i.e., if the value of a bundle of goods is not equal to the sum of the values of the individual goods), the auction design can be challenging. Known theoretical solutions, such as the Generalized Vuckrey Auction or the Clark-Grove tax mechanism, are not applicable in practice. Some pragmatic alternatives that have been experimented with include menu bidding and the simultaneous ascending bid auction with activity rules.
(6) Setting: Extra-economical constraints. Method: Activity rules. Often the auction is conducted within a business context that prescribes or precludes certain actions. A typical example is presented by regulatory constraints, that preclude selling certain goods to buyers with excessive market power.
The above is only a synopsis of the space of auction types. It is possible to enumerate many dozens of other auctions and variants thereof. In addition to these codified auctions, but which we mean types of auction that are well established, deployed, and studied, there exist essentially an infinite space of possible auctions, each defined by particular idiosyncratic rules and parameters.
A good example of idiosyncrasy of high-end auctions is the design of the California Power Exchange (the CalPX, or simply PX). The PX is a double auction in which buyers and sellers of electrical power trade on a daily basis. The PX is designed to support at least two kinds of market—the day ahead market and the hour ahead market. In the day-ahead market twenty-four different auctions take place in parallel, one each for an hour of the next day. The rules for participation in each auction are complex, but here is a flavor. The bidding proceeds in rounds. In any given round a seller may offer to sell a certain quantity at a certain price, and a buyer may submit a similar buy bids. The price in the round is selected so that supply equals demand (the “clearing price”). In the next round, a seller may only decrease his bid, and a buyer may only increase it (in both cases there is a minimum change required). In addition to these rather simple rules, there is an additional rule, which is designed to encourage bidders to bid meaningfully rather than wait to the last round before doing so. According to this “activity rule”, a seller whose price exceeded the clearing price in the previous round must improve his/her bid, or forever lose the right to do so (a similar rule applies to buyers). Finally, in addition to this activity rule, bidders may (irrevocably) withdraw bids.
The reasons for this particular design are too complex to go into, and irrelevant to the current invention. The point of this example is that in that particular context there was a need to design a novel auction mechanism, different from any that existed previously. Similar phenomena have occurred in national spectrum auction designs (for example in the US, New Zealand, Australia, Mexico, and other locations), other energy auctions, offshore oil drilling rights, and many other settings.
Despite the in-principle infinite span of possible auctions, the set of primitives underlying the various auctions is relatively small. It is this observation that underlies the present inventions, and which allows the construction a universal engine for the rapid creation and deployment of an essentially unlimited number of auction types.
Background on Internet-based Auctions
While thousands of auctions take place today on the Internet, they are consumer oriented, and by necessity of the low-end variety. Such auctions are conducted by online auction services, such as Onsale.com, eBay.com, and Priceline.com. In addition the technology developed by such firms in-house, several toolkits exist in the prior art with which to construct and run simple auctions. Examples include Opensite and Bonsai Software, as briefly described below. The auctions supported by these systems are low-end ones, though a certain degree of customization is allowed (for example, specifying the duration of the auction or selecting among several simple auction formats). Following is a brief discussion of some of these technologies.
The products of OpenSite, Inc. and Bonsai, Inc. represent well the state of the art in Internet-based auction toolkits and solutions. OpenSite offers solutions for hosting online, interactive Internet auctions. OpenSite sells three types of auction software solutions, which correspond to small, medium and large businesses. Opensite offers four different types of auctions. The additional configuration of the product to the customer's environment is extremely limited, and thus the software cannot be applied universally to a wide range of different types of customers. Similarly, Bonsai builds custom online auctions for particular applications. Its core product, EasyAuction, is very basic auction system. To implement specific auction types, Bonsai must resort to standard, labor-intensive custom software development.
The product of Moai, Inc. typifies products that are not auction products in themselves but rather specific software solutions, which embody auction technology. Moai builds software for creating online auctioning solutions for manufacturers or resellers, to sell surplus-goods and excess inventories. While Moai's software solution can be tailored to meet the needs of the customer, the auction style and mechanism do not change from one environment to the other. In that respect, the type of customers that Moai can cater to are limited by the applicability of the specific auction type that Moai uses.
Onsale, Inc. and Priceline, Inc. are the best representatives of Internet-based auction houses procure goods. Both have developed in-house software with which to conduct auctions. These home-brew systems were designed to the specific needs of the companies, and do not have the universal functionality
Ariba, Inc.
Blakely , Sokoloff, Taylor & Zafman LLP
Kanof Pedro R.
Millin V.
LandOfFree
Universal on-line trading market design and deployment system does not yet have a rating. At this time, there are no reviews or comments for this patent.
If you have personal experience with Universal on-line trading market design and deployment system, we encourage you to share that experience with our LandOfFree.com community. Your opinion is very important and Universal on-line trading market design and deployment system will most certainly appreciate the feedback.
Profile ID: LFUS-PAI-O-2507187