Equilibria Strategies for Selecting Sellers and Satisfying Buyers

Abstract

Dynamism of trade activity inevitably results in situations where sellers face local supply shortages. In such cases, sellers need to decide which buyer purchase requests to satisfy. Commonly, sellers satisfy purchase requests based on their arrival order, i.e., First In is First Served (FIFS). In electronic trade, sellers may follow strategies different from FIFS without the buyers being able to detect this difference. Buyers, in response to the sellers’ strategic behavior, may themselves adopt strategies that will maximize their utility. Previous research has suggested strategies to be used by electronic seller-agents and buyeragents. Yet, that research examined markets in which buyers are willing to accept partial satisfaction of their request and sellers’ stocks are all the same. A simulation tool was developed under such conditions. This paper utilizes the simulation tool to explore equilibria in more realistic markets, where sellers’ stocks are heterogeneous, and buyers suffer significant losses from partial satisfaction of their requests.

This research is supported in part by NSF under grant No. IIS9820657 and by IBM.