Tech Report CS-08-04

Marginal Bidding: An Application of the Equimarginal Principle to Bidding in TAC SCM

Amy Greenwald, Victor Naroditskiy, Tyler Odean, Mauricio Ramirez, Eric Sodomka, Joe Zimmerman and Clark Cutler

May 2008


We present a fast and effective bidding strategy for the Trading Agent Competition in Supply Chain Management (TAC SCM). In TAC SCM, manufacturers compete to procure computer parts from suppliers (the procurement problem), and then sell assembled computers to customers in reverse auctions (the bidding problem). This paper is concerned only with bidding, in which an agent must decide how many computers to sell and at what prices to sell them. We propose a greedy solution, Marginal Bidding, inspired by the Equimarginal Principle, which states that revenue is maximized among possible uses of a resource when the return on the last unit of the resource is the same across all areas of use. We show experimentally that certain variations of Marginal Bidding can compute bids faster than our ILP solution, which enables Marginal Bidders to consider future demand as well as current demand, and hence achieve greater revenues when knowledge of the future is valuable.

(complete text in pdf)