Design, development and validation of an agent-based model of electronic auctions

Abstract

This paper presents the design, development and validation methodology of an agent-based computational model of the B2C electronic auction marketplace. It aims at a comprehensive understanding of the varied issues governing a B2C electronic auction, incorporating the behavior of all relevant agents such as the auctioneer, the consumer and the retailer; and the environment in which these agents operate and interact. In contrast with conventional methods, agent based modeling employs a bottom-up modeling approach where behaviors of individual agents and rules for their interaction, specified at the micro level, give rise to emergent macro level phenomenon. The development methodology should ensure that agent models are aligned with theory, current knowledge of the field and observed phenomena, and output validity of the model also needs to be ascertained. Beginning with a general introduction to agent based computational modeling, this paper formalizes this alignment and validation methodology and elaborates each step, noting the rationale and means for achieving these. The manner in which this process was used in modeling B2C auctions is then described.