Accepted Papers - Day 1 (Wednesday)

Track A - RREM I (9.30-10.30)

An investigation of the consequences of Basel III using an agent-based model

Luís Gonçalves de Faria, and Steve Phelps

Abstract: Many recent agent-based models of financial markets are single- asset models which do not consider risk-management strategies in which agents can invest in both riskless and risky assets. This makes them unsuitable for exploring the implications of regulatory proposals such as Basel III which require agents to balance their exposure to risk by maintaining a minimum ratio of capital to risk-weighted assets. In this paper, we will introduce an agent-based model of a financial market in which agents can invest in both risky and riskless assets. We will first validate our model against the empirically-observed stylized facts of financial time-series data and then we proceed to investigate the counter- factual implications of the Basel III proposals for systemic risk. We will also use our model to make testable predictions about the consequences of Basel III which we shall revisit if and when the regulation is implemented.

Learning is Neither Sufficient Nor Necessary: A Dynamic Agent-Based Model of Long Memory in Financial Markets

Neil Rayner, Steve Phelps, and Nick Constantinou

Abstract: Financial time series data exhibits long memory phenomena, where certain behaviours in the market have a persistent influence on the market over time. It has been suggested that imitation of successful trader strategies by other less successful traders is an important factor in contributing to this persistence. We test this explanation by using an existing adaptive agent-based model and we find that the robustness of the model is directly related to the dynamics of learning; models in which learning converges to a stationary steady state fail to produce realistic time series data. In contrast, models in which learning leads to dynamic strategy switch- ing behaviour in the steady state are able to reproduce the long memory phenomena. We demonstrate that a model which incorporates contrarian trading strategies results in more dynamic behaviour in steady state, and hence is able to produce more realistic results. We also demonstrate that a non-learning contrarian model that performs dynamic strategy switching produces long memory phenomena and there- fore that learning is not necessary. Models that can be validated against properties of empirical high frequency financial data should allow exploration of the robustness and reliability qualities of market mechanism modifications.

Track B - Dynamic Pricing (9.30-10.30)

Forecasting prices in dynamic heterogeneous product markets using multivariate prediction methods

Gianfranco Lucchese, Jan van Dalen, Wolfgang Ketter, and John Collins

Abstract: Hedonic modeling is used to measure the product price behavior overall in high-tech markets. In a previous work, we showed the opportunity to extend the simple regression to a state space model evaluating hedonic prices from product prices. We created and tested an online estimation algorithm for those values. In that way, we can study time series of implicit prices for individual components of a range of products. In this paper, we implement and compare the hedonic model forecast performances respect to standard autoregressive models, univariate and multivariate. We find that hedonic values not only give extra information about supply market, but they can improve univariate predictions and in, certain periods, also multivariate ones. We show the correctness of algorithm using online version of it. An agent may predict prices for different products sharing a set of component, by taking into account the structure of production process. An application in a multi-agent supply chain simulation confirms the goodness of algorithm to be implemented in a future framework for online price analysis and prediction.

VoIP Pricing in Competitive Telephony Markets

Yung-Ming Li, and Shih-Wen Chiu

Abstract: As a disruptive technology, the Voice over Internet Protocol (VoIP) service has a great impact on telecommunication market. While VoIP over two end computers is free, VoIP providers generate profit from so-called phone-in and phone-out services, which allows the VoIP accessible users to contact conventional phone numbers. Compared with conventional public switched telephone network (PSTN) service, VoIP service has the advantage of a lower charge rate. However, it also incurs more quality uncertainty and security risk concerns. In this paper, utilizing game theoretic models, we analyze the market interactions of VoIP-to-PSTN service industry and prescribe the optimal pricing strategies with respect to both types of telephony services. Several perspectives have been addressed to help clarify the progress and evolution of VoIP services and intimations for both PSTN operators and VoIP service providers are also represented to develop several managerial implications.

Track A - RREM II (10.45-12.15)

Social learning and financial market stability

Daniel Ladley, Terje Lensberg, Jan Palczewski and Klaus Reiner Schenk-Hoppé

Abstract: Over-the-counter (OTC) financial markets, in which trader transact with each other directly, have been criticized for being opaque, illiquid and for exacerbating credit risk. To reduce these problems there have been calls, by regulators and observers, to move trade in many instruments, including derivatives, to centralized exchanges. It is the belief of proponents of this call that by forcing all trade to go through a central counterparty that markets will become more stable and less risky for the participants. The recent financial crisis, however, has highlighted how little is known about the interdependence between the architecture of markets and the behavior of traders who interact within them. Rather than disciplining their participants and delivering efficient allocations financial markets seem to have encouraged greed, excessive risk-taking and unethical behavior. The observation that markets can bring out the worst in those who trade in them, or attract traders who are the seed to its own destruction, is quite at odds with the conventional view of financial markets in economics and finance which sees them as quite, efficient and mostly self-regulating.

A Diversity Dilemma in Evolutionary Markets

Peter R. Lewis, Paul Marrow, and Xin Yao

Abstract: Markets are useful mechanisms for performing resource al- location in fully decentralised computational and other systems, since they can possess a range of desirable properties, such as efficiency, decentralisation, robustness and scalability. In this paper we investigate the behaviour of co-evolving evolutionary market agents as adaptive offer generators for sellers in a multi-attribute posted-offer market. We demonstrate that the evolutionary approach enables sellers to automatically position themselves in market niches, created by heterogeneous buyers. We find that a trade-off exists for the evolutionary sellers between maintaining high population diversity to facilitate movement between niches and low diversity to exploit the current niche and maximise cumulative payoff. We characterise the trade-off from the perspective of the system as a whole, and subsequently from that of an individual seller. Our results highlight a deci- sion on risk aversion for resource providers, but crucially we show that rational self-interested sellers would not adopt the behaviour likely to lead to the ideal result from the system point of view.

Market Niching in Multi-attribute Computational Resource Allocation Systems

Edward Robinson, Peter McBurney, and Xin Yao

Abstract: We propose a novel method for allocating multi-attribute computational resources via competing marketplaces. Trading agents, working on behalf of resource consumers and providers, choose to trade in resource markets where the resources being traded best align with their preferences and constraints. Market-exchange agents, in competition with each other, attempt to provide resource markets that attract traders, with the goal of maximising their profit. Because exchanges can only partially observe global supply and demand schedules, novel strategies are required to automate their search for market niches. Novel attribute-level selection (ALS) strategies are empirically analysed in simulated competitive market environments, and results suggest that using these strategies, market-exchanges can seek out mar- ket niches under a variety of environmental conditions.

Track B - E-markets (10.45-12.15)

Decision Making Aid in Mobile Environment by Behavioral Characteristic

Mitsuaki Nakasumi

Abstract: Despite the explosive growth of mobile environment and the rapidly increasing number of consumers who use location based search, we cannot find how consumers make purchase decisions in such situation. An unique characteristic of mobile environment is that they allow retails to create marketing context with location. A desirable recommendation from a consumer perspective is the implementation of sophisticated decision aid to assist consumers in their purchase decisions by providing the recommendation mechanism to their individual preferences.

The availability of such decision aid, which we refer to as context based processes for consumers, may lead to a transformation of the way in which consumers search for product information and make purchase decisions. While making purchase decisions, consumers are often unable to evaluate all available alternatives in great depth and thus, they tend to use two-stage processes to reach their decisions.

At the first stage, consumers typically screen a large set of available products and identify a subset of the most promising alternatives. Subsequently, they evaluate the latter in more depth, perform relative comparisons across products on important attributes and make a purchase decision. Given the different tasks to be performed in such two-stage processes, context based processes that provide support to consumers in the following respects are particularly valuable: (1) the initial screening of available products to determine which ones are worth considering further, (2) the in-depth comparison of selected products before making the actual purchase decision. The decision aid also includes multi-attribute product choices based on expert (same as bell captain) behavioral characteristic.

This paper shows the nature of the effects that the context based decision aid may have on consumer decision making in mobile environment and the effects of two decision aid functions which designed to assist consumers in performing one of the above tasks on purchase decision making in mobile environment.

Conceptualizing E-Selling

Petri Parvinen, Olli Tiainen, Jari Salo, Essi Pöyry, and Hedon Blakaj

Abstract: This research explores and investigates the conceptualization of e- selling. A review and 42 in-depth interviews with industry experts show that e-selling is seen as an activity distinct from e- commerce, e-marketing and e-retailing - digital human-like interaction directed at increasing customer value by securing a business exchange. The article discovers 16 different interactivity cues that do not fit the traditional concepts of e-commerce and e- marketing. The results also identify several key issues for the future of e-selling, including value creation-orientation and serving hedonism.

Moving to the Mobile Internet: Analyzing Sedo's Domain Parking Services

Claudia Loebbecke, and Thomas Weiss

Abstract: In this exploratory case study, we examine Sedo, one of the world's leading domain trading and parking companies in its efforts of going mobile. We introduce domain parking services and investigate the opportunities and challenges resulting from the company's innovation efforts due to the trend towards the mobile Internet. Based on Henderson and Clark [1] and Atuahene-Gima and Ko [2], we find that incremental and architectural innovations mark Sedo's efforts to strengthen its mobile profile and to complement its desktop business. We discuss whether modular or radical innovations, which overturn the existing business could be an alternative recipe for success in mobile parking. Yet, our data lets us conclude that the peculiarities of domain parking limit the transferability of the parking business to the mobile world. This seemingly negative finding helps us to rethink business model contexts and contingencies in the overall hype for the mobile Internet.

Poster Announcements (15.10-15.30)

Succeeding In A Modern Online Travel Marketplace: What Do Consumers Need From A Travel Reservation Web Site?

Isaac J. Gabriel

Abstract: Online travel industry has been growing at a fast pace over the last several years and is expected to grow at a steady rate in the future. Since this market is very attractive, it becomes very competitive. In order to survive the competition, online travel providers need to make sure that their sites offer features that are critical to consumers.

This paper reports on results of an empirical pilot study that identified dimensions consumers use when selecting travel reservation web sites for their travel needs. Using current literature, a set of characteristics or features of travel reservation web sites was identified. Then a survey was constructed for subjects to rate these characteristics/features against each other. Data was analyzed using multidimensional scale analysis. As a result of statistical analysis, critical dimensions online consumers use to purchase travel packages on the Internet were identified.

This research identified two such dimensions: 1) Reliability & Information, and 2) Ease of Use & Reassurance. Consumers need to be confident that the site is reliable and their personal information is being handled adequately. In addition, there is an urge to get more information, whether it is related to their traveling destination or, simply, consists of comments and opinions of fellow travelers. Moreover, consumers are looking for intuitive and user-friendly web site interfaces as it has always been the case in the past while preferring to have a choice of using advanced search capabilities when needed. Finally, as it was critical in the past, consumers wish to get reassured that adequate secure technologies were utilized in the transmission of sensitive data when interacting with the web site. Another interesting observation is that security-related features remain to be critical to online consumers as it was in the past.

The Decision Method for Group-buying Websites Based on UEOWA Operator

Lifang Peng, Nannan Li and Qi Li

Abstract: With the popularity of group-buying websites in China, group- buying has become a particularly effective form of e-commerce now. With more and more group-buying websites emerging, it is difficult for consumers to make decisions about which website should they choose to participate in. Hence, this paper probes into how consumers can assess group-buying websites with multiple attributes and make quick decisions effectively. The assessment of them is a complex problem and has fuzziness, so we come up with this method based on UEOWA operator, which can solve this kind of problems. This study aims to supply a quantitative method for assessing the group-buying website based on UEOWA operator to help consumers make quick decisions among group- buying websites.

Track A - RREM III (15.45-16.45)

Some clues to the determinants of feedback behaviour

Domenico Colucci, Simone Salotti, and Vincenzo Valori

Abstract: We report the results of an experiment designed to investigate the determinants of feedback behaviour in electronic markets. Ratings driven by disconfirmed expectations should in principle reduce the asymmetric information problems of these markets. However, some other motives may influence the decisions of the sellers. In particular, empirical evidence suggests that the economic surplus obtained from the transaction may have some bearing on the way sellers are rated. Our design was meant to test whether and to what extent disconfirmed expectations and/or the transaction surplus play a role in determining the feedback behaviour of buyers in e-marketplaces. The results indicate that both factors affect the ratings, the latter having the stronger effect. One possible empirical implication could be that when an online purchase is a good deal a seller will typically get away with (moderately) exaggerated descriptions of the good on sale, obtaining a positive rating from the buyers.

Sequential Mixed Auctions

Boris Mikhaylov, Jesus Cerquides, and Juan A. Rodriguez-Aguilar

Abstract: Mixed multi-unit combinatorial auctions (MMUCAs) offer a high potential to be employed for the automated assembly of supply chains of agents. However, in order for mixed auctions to be effectively applied to supply chain formation, we must ensure computational tractability and reduce bidders’ uncertainty. With this aim, we introduce Sequential Mixed Auctions (SMAs), a novel auction model conceived to help bidders collaboratively discover supply chain structures. Thus, an SMA allows bidders progressively build a supply chain structure through successive auction rounds. Moreover, the incremental nature of an SMA provides its participants with valuable information at the end of each auction round to guide their bidding. Finally, we empirically show that SMAs significantly reduce the computational effort required by MMUCA at the expense of a slight decrease in the auctioneer’s revenue.

Track B - IT Services I (15.45-16.45)

Transforming Social Networking from a Service to a Platform: a Case Study of Ad-hoc Social Networking

Vedran Podobnik, and Ignac Lovrek

Abstract: In this paper we discuss how a synergy of fundamental concepts standing behind the Facebook (i.e., social networking) and the iPhone (i.e., mobile and pervasive platform) can generate a sustainable business model for the ICT industry. Namely, we will show that a transformation of social networking from a service to a mobile and pervasive platform can produce multiple benefits for both social network service providers as well communication operators/smartphone manufacturers, while provisioning end- users an added value. Additionally, we will demonstrate our proposal through a case study presenting ad-hoc social networking, a platform for managing ad-hoc social relationships (i.e., set up by (mobile) users located in a limited geographical area during a certain period in time).

Social Support Mechanism in Micro-blogosphere

Yung-Ming Li, Cheng-Yang Lai

Abstract: With the advance of Internet, online social networks could be seen as a large expert group exclusively belongs to online users. The social appraisal support involves the feedback about friends’ opinions which represent the opportunities for sales. In this paper, a mechanism composed with social network analysis (SNA), intuitionistic fuzzy sets (IFSs), and technique for order preference by similarity to ideal solution (TOPSIS) is proposed to achieve social appraisal support for online users within micro-blogosphere. The proposed mechanism can successfully summarize the collective opinions from online social network and further speed up the decision process in support users’ purchasing behaviors.