Bidding House: A Web Service and Ontology based Framework for Auctions

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1 Bidding House: A Web Service and Ontology based Framework for Auctions Dr. Saroj Kaushik, Himanshu Tagra, Computer Science and Engineering, Indian Institute of Technology, New Delhi, India saroj@cse.iitd.ernet.in, htagra@cse.iitd.ernet.in Abstract The advent of e-commerce has brought about a radical change in the process of auctions. This has given bidders flexibility to try and get best possible deals by participating in multiple auctions. This has also lead to evaluation of usage of agents in multiple auctions. However due to varying nature of auction houses, the agents needed for participating in different auctions need to be reconfigured for each auction. This might not be possible to be done by individual users. We propose a flexible framework which will act as a bidding house and participate in the various auction houses on behalf of the user. This framework uses Web services as granular agents and ontology as shared method of communication between these agents. Keywords: e-commerce, software agent, auctions, forward auction, reverse auction, web services, ontology 1. Introduction Auctions are considered to be an important part of e-commerce[1]. It is a process in which there is one seller and many buyers. It is also called forward auction. For example, a company that had excess inventory could list the inventory on an emp (e-marketplace) and sell it rather than write-off the inventory. A reverse auction is the one where there is one buyer and many sellers. An example of this would be a company that needs 400,000 circuit boards. The company could list their desire to purchase the circuit boards and would choose from the many sellers who respond to the request. Some of the different types of auctions are English Auction (where the price goes up and the highest bidder gets the item), Dutch Auction, etc. In an English Auction, the auctioneer states the reserved price (minimum acceptable price set by the seller) and bids are accepted above this price. The bidders continuously raise their bids until the auction has reached its time limit. The winner is one who has the highest bid. Dutch auctions are quite opposite to the English Auctions. In these type of auctions, the price is progressively lowered until there is an offer from a bidder to claim the item. In case two bidders claim for the item at the same price, either the auction is restarted from a higher price or the bidder whose bid was received first is declared the winner. The Vickrey auction is a sealed bid auction in which each bidder, bids on

2 his/her own knowledge without any idea about the bid value of other bidders. The winner is one who has the highest bid but he/she pays the amount equivalent to that of the second highest bidder. The popularity of online auctions has led to the establishment of various auction houses like ebay, Amazon.com, Yahoo!Auction, Priceline, etc. This, in turn, has lead to similar items being auctioned by different auction houses at the same time(overlapping time intervals). However for the user to be able to participate in different auctions at the same time requires lot of time and energy. This can be handled by usage of an agent[2,3]. However, for the agent to be effective it needs to be built/configured in such a manner that it can participate in all the existing auctions as well as be extensible to participating in auctions hosted by new auction houses. We feel that this might not be possible with individual users due to lack of standards in this space and hence we propose a bidding house which can participate on behalf of the users based on certain well defined revenue models. We have proposed the solution to be flexible to handle auction houses which have certain fixed standards as well as auction houses which might be based on ontology. The support of ontology based auction houses has been ingrained in this framework because of expected spread of Semantic Web in the future [4]. Ontology[5,6,7] has its roots in philosophy and can be defined as conceptualization of a specification. Due to the spread of Semantic web, there has been increase in the usage of ontology in auctions/ negotiations. However, most of the solutions based on ontology have been restricted to the usage of ontology for the entire marketplace rather than provide a solution for both ontology as well as non-ontology based marketplaces. The proposed framework has been built using Web Services. Web Services[8,9] is a key technology for enabling distributed computing and e-commerce. Web services improve connectivity, efficiency, flexibility, immediacy, and interoperability of disparate systems. Research has been going on in the area of usage of ontology in e-commerce. Tamma[7] has proposed a solution of using ontology for supporting negotiations in e-commerce. However, proposed solution assumes that all the parties would commit to chosen ontology and does not provide any solution for interacting with systems not based on ontology. Another research paper by Lamparter[8] also deals with ontology based marketplaces only. Our solution is unique in many ways. Firstly, it introduces the concept of bidding houses whose only purpose is to bid in auctions for its registered users. Secondly, our solution is flexible in dealing with both ontology and non-ontology based marketplaces. Thirdly, our solution is internationalized and can participate in auctions occurring in different countries which have different language and currency. This paper briefly explains the concept of bidding houses along with the architectural framework which will enable it to be possible.

3 2. Bidding House Auction House - 1 Auction House - 2 Auction House - n Bidder 1 Bidding House Bidder 2 Figure 1 Futuristic Marketplace A typical electronic marketplace consists of auction houses and bidders. The bidders typically can participate in one or two auctions depending on the time bandwidth of the person. The auctions in these auction houses typically span over days. In the case of items which can be got from different auction houses, it is difficult for an individual to follow each an every auction as well as get the best deal for this item. The Bidding house does this thing automatically for the individual. It locates all the relevant auction houses for the user, bids in them and gives the item to the user at the best possible price. Figure 1 depicts the reach of a business house vis-à-vis an individual bidder. The process of auctions using bidding house is described by the following steps. 1. The registered user approaches a bidding house with the characteristics of a particular item it wants to buy. It gives preferences to the bidding house with regard to the maximum price it can pay for that item, priority of the item, the date by when the item is required, etc. 2. The bidding house shares with the user the probability of getting that item at that price. It also gives an idea about the price in which the item would definitely be got. 3. In case the user wants the bidding house to get the item, he/she has to deposit the maximum amount he/she has decided to bid. 4. The bidding house then bids in the various auctions and tries to get that item as per user preferences. Based on the maximum price of the user, the bidding house tries to get the item. 5. The user is kept updated and he/she is given various options like if he increases his date by which he/she wants the item, the probability of getting that item increases, etc.

4 6. Based on the result of the bidding house, the user is returned the remaining amount. Some of the methods in which the bidder house can be remunerated for the business service offered are mentioned below. 1. The bidding house can charge certain fees for registration. 2. The bidding house can charge based on the amount of transactions. 3. It can also charge based on the amount of benefit brought to the user. This means the amount it got the item is less than the maximum price it was prepared to pay. The details of the method of charging the customer are beyond the scope of this paper. It only gives a brief idea about the various options of charging the customers for using this service. 3. Bidding House Framework The bidding house framework is a flexible framework based on web services. It is based on service oriented architecture. All the web services are loosely coupled and provide well defined services. There is a transaction cost associated with each service and all the transaction cost is accumulated and charged to the user based on the services used by him/her. The inner communication between the various web services is done using well defined ontology. The solution can be extended by registration of more web services. The only criteria for adding web services are that it should follow the defined ontology. There are reward points associated with each web service and depending on the result of that service they are increased or decreased. The transaction cost depends on these reward points. Figure 2 on the next page gives details about the various types of web services required to build the framework. They are mentioned in detail below. 1. Registration Agent The primary goal of the registered agent is to register the user. The registration process involves getting the user profile, credit card details/payment method details, age verification, etc. The registration agent talks with the payment gateway agent for verification of credit card and age verification. The user has the ability to change his/her profile anytime. 2. User Agent This web service is used to interact with the users. They use the services of coordinating agents to get the number of auctions being available during the time duration in which the user wants to get the item. Based on the number of auctions and the history available about these auctions, the user agent calculates the probability of winning the auction for the user. It also finds out what be the best amount of getting the item at all costs. The algorithm to get probability as well as the maximum amount is made as separate web services such as they can easily be replaced or they can be made specific for the particular business scenario. The user agent also takes input as the transaction amount which the user is willing to pay. Based on this, it decides which strategy as well as learning agents to deploy. Higher is the transaction fees better is the service guaranteed as well as better is the chance of winning the item. 3. Coordinating Agent The coordinating agent first finds out which are the specialized agents it should interact it. This agent is the heart of the solution. It chooses the correct specialized agents to deploy and also decides when to withdraw that agent from the particular auction. The nature

5 of bidding that needs to be done is decided at an overall level by this agent. The bidding can vary from being aggressive bidder or just being an observer. Registration Agent User Agent User Agent User Agent User Agent Coordinating Agent Coordinating Agent Specialized agents Specialized agents Specialized agents Connector Agent Figure 2 Bidding House Framework 4. Specialized Agents Specialized agents are vertical specific agents. There primary goal is to bid in the auction. They consist of local strategy agents as well as local learning agents. The various types of specialized agents would be with respect to auction houses, countries, etc. The auction houses which each specialized agent might target depend on the strategy required for that auction house. A particular specialized agent might tackle more than one business house if they share a common strategy. The country specific specialized agent would work according to the strategy of that country as well as take care of the problems in language nomenclature. This makes the system truly internationalized and gives a person sitting in any country the best

6 possible deal. The system takes care that of the delivery cost. The local strategy agent works based on the type of auction taking place like it is different for English auction, etc. 5. Connector Agent The connector agent basically interfaces with the auction house. It keeps the specialized agents isolated from the interface differences from different auction houses. This has been done keeping in mind that different auction houses might support different interfaces. This also ensures that when the movement towards Semantic Web happens and ontology based marketplaces spring up, then the bidding house can participate in both types of auctions. In a typical scenario, the user invokes a user agent either through a web based interface(html page) or through a machine based interface. The user agent then communicates with the coordinating agent. The coordinating agent now becomes tightly coupled with this user and becomes the owner of deciding the overall strategy for winning the auction for the user. This agent utilizes the services of specialized agents for bidding in the auctions. The specialized agent uses the services of connector agents to interface with disparate auction houses. Salient features of the Framework Some of the salient features of the proposed framework are mentioned below. 1. It is highly scalable and distributed. All the web services can be deployed on different locations. 2. It is extensible through the use of ontology. Any web service can be added onto the system without making any change in the basic framework. 3. It is changeable based on the changing demands of the market. Any web service which is not performing well will be eased out of the system through the use of reward point s mechanism. 4. It can be integrated very easily with different systems. 4. Conclusion and Future Work This paper introduced the new concept of bidding house. It defined the manner in which the bidding house can provide service to the user. It detailed out the benefits for the user vis-à-vis individual bidding. A framework for developing bidding house was also proposed. This framework was made using web services and ontology so as to ensure it is flexible and extensible. The solution proposed can interact seamlessly with both ontology based systems as well non-ontology based systems. The framework also takes care of internationalization and hence takes the benefit of participating in auctions across the globe. The framework is currently being implemented. For the future, the method of generating revenue for the bidding house can be further defined. Furthermore, this system can be compared and bench marked against existing systems which participate in only a sub set of the auctions. References

7 [1] Manoj Kumar and Stuart I. Feldman, Internet Auctions, 3rd USENIX Workshop on Electronic Commerce, 1998, Pages [2] H.S. Nwana, Software Agents, An Overview in Knowledge Engineering Review, [3] Jeffrey M. Bradshaw,1997, An Introduction to Software Agents, J. M. Bradshaw (Ed.), Software Agents.(Cambridge, AAAI Press/The MIT Press). [4] Ying Ding, Ontology: The enabler for the Semantic Web, ying/ download/ ontology.pdf. [5] Robert Jasper and Mike Uschold, A Framework for Understanding and Classifying Ontology Applications, Proc. IJCAI-99 workshop on ontologies and problem-solving methods (KRR5), Stockholm, Sweden,31 July 6 August [6] Grigoris Antoniou, Enrico Franconi and Frank van Harmelen, Introduction to Semantic Web Ontology Languages In Teaching Material of ReasoningWeb, LNCS XXXX, Springer 2005 (accepted) [7] Valentina Tamma, Steve Phelps, Ian Dickinson and Miachael Wooldridge, Ontologies for supporting negotiation in e-commerce, Engineering applications of artificial intelligence, 18(2): , March 2005 [8] Steffen Lamparter and B. Schnizler, Trading Services in Ontology-driven Markets, accepted in the 4 th International Semantic Web Conference, ISWC, 2005, Galway, Ireland. [9] J Lawler, D. Anderson, H. Howell-Barber, J. Hill, J. Javed and Li, A study of web services strategy in the financial services industry. In the proceedings of ISECON 2004.

MAREK MAURIZIO DOCENTE A CONTRATTO ASSEGNISTA DI RICERCA UNIVERSITÀ CA FOSCARI, VENEZIA

ONLINE AUCTIONS MAREK MAURIZIO DOCENTE A CONTRATTO ASSEGNISTA DI RICERCA UNIVERSITÀ CA FOSCARI, VENEZIA AUCTIONS AN AUCTION IS A MARKET MECHANISM THAT USES A COMPETITIVE PROCESS BY WHICH: A SELLER SOLICITS