Rules needed to prevent corner position in wholesale market
Dear colleagues -
As usual, broker developers have outsmarted the game developers once again. This time, at least one broker (or its developer) has figured out how to corner the wholesale market, while jacking up prices by many orders of magnitude. It's not pretty.
In order to make the final rounds of this year's competition interesting from a research standpoint, we need to institute some rules to prevent this. If you do a little research on the topic, you will see that even Aristotle wrote about an instance where a bright entrepreneur figured out how to corner the market in olive presses in advance of a bumper harvest. Current commodity futures markets have regulators that try to discover and discourage attempts to corner markets, and they are usually successful, but sometimes they fail in more or less spectacular ways. So it's not a simple problem to prevent such behavior in open futures markets such as the Power TAC wholesale market.
We are proposing two new rules that we think could get broker developers to re-focus their attention on serving their customers rather than exploiting their competitors:
* Reduce the profitability of cornering the market. This would change the way the market computes clearing prices in cases where there is a wide spread between the highest cleared ask and the lowest cleared bid. Currently, the clearing price is midway between these two prices, but that can result in very counterintuitive results when a broker manages to get the lowest bid price at a value many orders of magnitude above the highest ask price. Therefore, we propose to limit the seller's margin to a reasonable value like 5%. So if the lowest bid price is 10^5 and the highest ask price is 100, the market will clear at 105 rather than just above 5x10^4.
* Prohibit cornering the market, more or less the way it's typically done in the real world. This would place a limit on the market position of any one broker to a fraction of the total supply. This limit could increase as lead-time decreases. So for example, we could limit the market position to 60% 24h out, and let it increase to something like 95% 1h out. Keep in mind that we have never seen a case where total net customer demand exceeds about 85% of the capacity offered in the wholesale market.
At this point, the change to limit clearing prices is implemented in 1.3.3-SNAPSHOT, but not yet deployed, so you would only see it if you are running in a server source environment, and if you pull down the latest version of the auctioneer module. I will hold off deploying to give all of you some time to respond with your thoughts.
Re: Rules needed to prevent corner position in wholesale market
Dear colleagues -
Yesterday I deployed a new 1.3.3-SNAPSHOT package, and updated server-distribution_1.3.3-SNAPSHOT, to incorporate three changes resulting from our analysis of the initial qualifying games. Changes include:
* In the wholesale market, the clearing price is now the lower of (1) halfway between the last cleared bid and the last cleared ask, and (2) 105% of the last cleared ask price.
* The maximum allowed market position in the wholesale market is now 60% 24h in the future, ramping up linearly to 95% 1h in the future. This should allow competitive brokers to prevent other brokers from gaining unreasonable market positions, but only if they are willing to match the prices offered by the broker attempting to gain such leverage.
* The problem of incomplete customer usage profiles in the bootstrap record is fixed.
As always, please let us know if you have problems with the software, or if you have ideas for how it could be improved.