Wednesday, 29 July 2009

Completing the feedback loop

Assuming that we have a multi-attribute CDA in place to allow for buyers and sellers to interact, what causes the buyer to come back after one transaction?

a) When the utility function that monitors the value from the purchase becomes negative, the buyer needs to come back. That is, if an app bought an image-manipulation ws with a stated performance rating of 10AMM (Above Market Minimum) for £x +£y(market entry cost), it expects a value of at least £x + £y to be delivered. Upon composition and monitoring, if the value that the app receives is less than £(x+y), then the app will consider returning to the market. But there are two possible outcomes: the app goes back and bids for more than 10AMM or the app will try to buy 10AMM for less then £x

How do we figure out what's optimal for the app?


  1. This comment has been removed by the author.

  2. A small point with potential big implications, but:

    "When the utility function that monitors the value from the purchase becomes negative, the buyer needs to come back."

    That's a reasonable assumption, though it only establishes a necessary condition for returning to the market, not a sufficient set of conditions.

    A trader may of course return to the market for many reasons as dictated by their strategy.

  3. Incidentally this blogger interface isn't very nice. I forgot to check "email me with follow-ups" and it wouldn't let me enable it afterwards.

    My only option was to delete the comment and re-post it, but that just left "this post has been removed by the author"!

    Messy :-\

  4. Why isn't it sufficient? That the trader returns to the market for a different reason(s) is unrelated, isn't it?

    It would not be sufficient when the utility becomes negative, but for some strategy a trader would *not* return to the market.

    Are you saying that such a strategy would exist and be sensible?

  5. The interface sucks, I know. But is there anything I can do? Post it differently, I mean?

  6. Oh sure - sorry I wasn't being very clear.

    Of course negative utility can be assumed to be a sufficient condition to trigger a trader to return to the market.

    My point was that a model which considers this alone will not be sufficient, since there are indeed other unrelated conditions which may also trigger a return to the market.

    Make sense?