31, Customer Coalitions in Electronic Markets

Notes taken from 'Customer Coalitions in Electronic Markets' (2001), by Maksim Tsvetovat, Katia Sycara, Yian Chen, and James Ying

"... In this paper, we report on coalition formation as a means to formation of groups of customers coming together to procure goods at a volume discount ("buying clubs") and economic incentives for creation of such group..."

1, Introduction

A coalition is a set of self-interested agents that agree to cooperate to execute a task or achieve a goal.

2, Prior Work

3, Incentives for Customer Coalitions

(Supplier Incentive to Sell Wholesale; Customer Incentive to Buy Wholesale)

4, Coalitions and Wholesale Purchasing

In the real world, a single customer rarely wants to buy large enough quantities of goods to justify wholesale purchasing... In order to lower the purchase price (and, therefore, increase utility), self-interested customer agents can join in a coalition... This would enable the coalition to buy a wholesale lot from the supplier, break it into sub-lots and distribute them to its members, thus raising the utility of each individual member.

However, the formation and administration of coalitions, as well as distribution of sub-lots has its costs... In particular, such costs include the cost of administering coalition membership, cost of collecting payments from individual memberships, and the cost of distributing items to the members when the transaction is complete. In some cases (such as distributing copies of software) some of the costs can be very small, and in other cases may rise to be prohibitively large.

5, Coalition Models

It is possible to construct a number of coalition models and protocols, all of which would have different properties and requirements. In general, all coalition models include several stages:
- Negotiation
- Coalition Formation
- Leader Election/Voting
- Payment Collection
- Execution/Distribution stage

In design of coalition protocols, the following issues have to be taken into account:
- Coalition Stability
- Distribution of Gain
- Distribution of Costs and Utility
- Distribution of Risk
- Trust and Certification

Most coalition protocols can be divided into two classes (pre-negotiation and post-negotiation), based on the order in which negotiation and coalition forming happen...

(Post-negotiation; Pre-negotiation; Distribution of Costs and Utility)

6, Customer Coalitions for Volume Discounts - An Implementation

(Coalition Protocol; Testbed Architecture; Implementation of Agents; PiPL Language)

7, Conclusions and Future Work