1. Computational Economy
Christos Papadimitriou
Hal R.Varian
SIMS, Economics,Business

2. Efficient resource allocation
Administrative framework for management
Robust
Adaptive
Scalable
E.g., Load balancing
requires information
requires incentives

3. Computational markets
Ad hoc iteration
adjust price till supply = demand
Economic mechanism design
well-developed theory
some experimental evidence

4. Example: Auction design
English auction
Sealed bid auction
Vickrey auction
highest bidder pays second highest price
payoff to bidder 1 = (v1 - b2)Prob(b1 > b2)
Example of revelation principle
Implication for design of mechanism

5. Difficulties with "artificial markets"
Means of payment?
funny money
real money
What is really scarce?
storage?
cycles?
expertise?
applications?

6. Starting point Each department owns their equipment
Voluntary participation
“What’s in it for me?”

7. Economic anthropology
The informal economy
works fine with proximity and reciprocity
what will work with distributed computing?
Evolution of markets (e.g., E. Europe)
bilateral trade
multilateral trade
standardized contracts
markets for resources and services

8. What is needed to facilitate evolution of trade?
Information
Property rights
Incentives
Communications/transportation
Market makers
Medium of exchange
Contractual forms
Arbitration

9. Proposal Provide infrastructure to facilitate trade
partly technology, partly socioeconomic
Help it evolve into a market
standard commodities
frequent exchange
Novel aspects
humility
evolutionary aspect

10. Implications for algorithm design
Current practice
pick objective, optimize
chosen objective may not match real world
objectives and constraints change

11. Possible scenario for SimMillenium
Market sets objectives
Spectrum of algorithms
dynamically tune to environment
hybrid algorithms
Change practices of algorithm design

12. Why here, why now? Need decentralized, robust, scalable management
Local expertise, experience
Mariposa: CS
INDEX: EE
Organization theory: CS/Business
Game theory, contracts: Economics, OR, SIMS
Provides framework for services market