Intelligent Personalized Trading Agents that Facilitate Real-time Decision-making for Auctioneers and Buyers in the Dutch Flower Auctions

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Intelligent Personalized Trading Agents that
Facilitate Real-time Decision-makingfor
Auctioneers and Buyers in the Dutch Flower
Auctions
Case by Wolfgang Ketter, Eric van Heck, Rob
Zuidwijk Rotterdam School of Management, Erasmus
University
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Overview and Scope

• Introduction
• Clock auction mechanism
• Decision making supported by agents
• No solution yet! case purpose exploration

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Dutch Flower Auction

• Worlds largest
• Association set up by growers
• Flower industry is a giant network
• Including breeders, growers, auctions,
  wholesalers, retailers, and transportation firms
  for im- and export.
• Import from warmer countries Israel, Kenya,
  Zimbabwe etc.
• Export to Germany, UK, France

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Click picture to start Youtube movie (start at
1.20 min)http//www.youtube.com/watch?vaxs48O35z
Fs
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Clock Auction

• Flowers transported from cold-storage warehouse
  to auction hall on carts.
• 2-3 clocks per hall.
• Sample shown to bidders by raiser.
• Buyers bid using Dutch auction price starts high
  and drops fast. First person to stop the clock
  wins and pays that price. Invented in 1887.
• Extremely fast! On average an auction clears
  every 3-5 seconds.

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Clock Auction cont.
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Information
Lot nr.
Unit of currency
Sub lot nr.
Identification number of the auctioned goods
Amount of stems per unit
Units
Minimum purchase quantity
Negative comments
Positive comments
S1, S2, S3, and S4 are sorting methodsS1
lengthS2 weight, or diameter S3 S4 are
dependent on the traded flower
Clock
Units( wagons x units per wagon)
Products
Wagons
Units per trolley
Amount of stems per unit
Grower(seller)
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Information

• Flower type and quality (including pictures and
  videoclip)
• Seller (name, background, reputation)
• Auction clock (price, units)
• Buyer (identification)
• Previous transactions
• Services (logistics, payment, settlement)
• Different buyers have different information
  needs

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Buyer Profiles

• General wholesaler (cost driven exporter)
• Specialist wholesaler (differentiator on quality)
• Large retailer (medium quality retailer)
• Small retailer (flower shop with specific client
  wishes)
• Competing in different markets gt different
  information needs
• Information needed for decision making
• Price information
• Product information
• Transportation information

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Decision Parameters

• (1) price
• (2) product, including quality
• (3) transportation costs
• (4) transportation time
• (5) upcoming auctions
• (6) market conditions
• More?
• Based on this information, must choose price and
  quantity in about 4 seconds

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Auctioneer Profile

• Auctioneer governs clock trading process, by
  controlling five parameters
• Speed of clock
• Initial price
• Swingback
• Reserve price
• Minimum lot size
• Speed vs. price tradeoff

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Decision Parameters

• (1) historical prices
• (2) quality measures
• (3) upcoming auctions
• (4) market conditions
• More?
• Based on this information, must make 5 decisions
  in about 4 seconds

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Intelligent Software Agents

• An agent is anything that
• perceives its environment through sensors
• acts autonomously upon that environment through
  effectors.
• A human agent
• Sensors eyes, ears etc.
• Effectors body parts as hands and legs.

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Intelligent Software Agents

• Intelligent software agents are used for complex
  decision-making
• Intelligent agents monitor the environment, make
  internal calculations, and act (or recommend
  actions) autonomously.
• Useful for supporting trade at auctions.
• E.g. for eBay auctions there are auction bots.

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Example of Ebay auction agent

• You define your preferences (personalize) and the
  agent monitors auctions and buys (acting
  autonomously) for you.

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Case Conclusion

• Case Question How can personalized intelligent
  agents be used at the DFA to enable better
  decisions for the bidders and auctioneers?
• Guiding question Do agents bring a saving in
  costs, or a true competitive advantage?

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Dutch Flower Auction Case

• You might want to explore
• www.floraholland.com (DFA website)
• Auction bidding software
• www.jbidwatcher.com
• www.freedownloadscenter.com/Best/auction-bidding.h
  tml
• Chapter 2 of Artificial Intelligence A Modern
  Approach by Russell and Norvig, 1995.
• Maes et al., 1999. Agents that Buy and Sell