U.S. patent application number 13/541096 was filed with the patent office on 2013-01-03 for systems and methods for pricing and selling digital goods.
This patent application is currently assigned to InterTrust Technologies Corporation. Invention is credited to Andrew V. Goldberg, Jason D. Hartline, Andrew K. Wright.
Application Number | 20130006800 13/541096 |
Document ID | / |
Family ID | 35517908 |
Filed Date | 2013-01-03 |
United States Patent
Application |
20130006800 |
Kind Code |
A1 |
Goldberg; Andrew V. ; et
al. |
January 3, 2013 |
SYSTEMS AND METHODS FOR PRICING AND SELLING DIGITAL GOODS
Abstract
Systems and methods are provided for pricing, selling, and/or
otherwise distributing electronic content using auction mechanisms.
A randomized auction mechanism is used to determine both the number
of goods that are sold and the selling price. The auction mechanism
automatically adapts to the bid distribution to yield revenue that
is competitive with that which could be obtained if the vendor were
able to determine the optimal fixed price for the goods. In one
embodiment a set of bids is randomly or quasi-randomly partitioned
into two or more groups. An optimal threshold is determined for
each group, and this threshold is then used to select winning bids
from one or more of the other groups. In another embodiment, each
bid is compared to a competing bid that is randomly or
quasi-randomly selected from the set of bids. If the bid is less
than the randomly-selected competing bid, the bid is rejected.
Otherwise, the bid is accepted and the bidder buys the auctioned
item at the price of the randomly-selected bid.
Inventors: |
Goldberg; Andrew V.;
(Redwood City, CA) ; Hartline; Jason D.; (Seattle,
WA) ; Wright; Andrew K.; (Monroe Towship,
NJ) |
Assignee: |
InterTrust Technologies
Corporation
Santa Clara
CA
|
Family ID: |
35517908 |
Appl. No.: |
13/541096 |
Filed: |
July 3, 2012 |
Related U.S. Patent Documents
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Application
Number |
Filing Date |
Patent Number |
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11262031 |
Oct 27, 2005 |
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13541096 |
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09666339 |
Sep 21, 2000 |
6985885 |
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11262031 |
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60155458 |
Sep 21, 1999 |
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Current U.S.
Class: |
705/26.3 |
Current CPC
Class: |
G06Q 40/04 20130101;
G06Q 30/08 20130101; G06Q 30/06 20130101 |
Class at
Publication: |
705/26.3 |
International
Class: |
G06Q 30/08 20120101
G06Q030/08 |
Claims
1-20. (canceled)
21. A method for vending a copy of a digital work performed by a
system comprising a processor and a non-transitory
computer-readable medium communicatively coupled to the processor
storing instructions that, when executed by the processor, cause
the system to perform the method, the method comprising: receiving
a plurality of bids for access to the copy of the digital work from
a plurality of bidders; selecting from the plurality of bids: a
first bid from a first bidder, and a first sample of one or more
bids, wherein the first sample of one or more bids does not include
the first bid; generating, based on the first sample of one or more
bids, at least one threshold; determining that the first bid meets
or exceeds the at least one threshold; and providing access to the
copy of the digital work to the first bidder.
22. The method of claim 21, wherein the at least one threshold is
generated to maximize a quantity obtained by multiplying (a) a
number of bids of the first sample of one or more bids that exceed
the threshold by (b) a bid value of a highest bid in the first
sample of one or more bids that is less than or equal to the
threshold.
23. The method of claim 21, wherein the copy of the digital work is
one of a plurality of identical copies of the digital work.
24. The method of claim 21, wherein the method further comprises:
receiving payment information from the first bidder in an amount
equal to the at least one threshold.
25. The method of claim 21, wherein the first sample of one or more
bids is selected from the plurality of bids in a random
fashion.
26. The method of claim 21, wherein the first sample of one or more
bids is selected from the plurality of bids in a quasi-random
fashion.
27. The method of claim 21, wherein providing access to the copy of
the digital work to the first bidder comprises providing secure
access to the copy of the digital work to the first bidder.
28. The method of claim 21, wherein providing access to the copy of
the digital work to the first bidder comprises sending the copy of
the digital work to the first bidder.
29. The method of claim 28, wherein providing access to the copy of
the digital work to the first bidder comprises securely sending the
copy of the digital work to the first bidder.
30. The method of claim 21, wherein the method further comprises:
selecting from the plurality of bids; a second bid from a second
bidder, and a second sample of one or more bids from the plurality
of bids, wherein the second sample of the one or more bids does not
include the second bid; generating, based on the second sample of
one or more bids, at least one second threshold; determining that
the second bid meets or exceeds the at least one second threshold;
and providing access to another copy of the digital work to the
second bidder.
31. The method of claim 30, wherein the second sample of one or
more bids does not include the first sample of one or more
bids.
32. The method of claim 24, wherein the method further comprises:
receiving payment information from the second bidder in an amount
at least equal to the at least one second threshold.
32. The method of claim 30, wherein the second sample of one or
more bids is selected from the plurality of bids in a random
fashion.
33. The method of claim 30, wherein the second sample of one or
more bids is selected from the plurality of bids in a quasi-random
fashion.
34. A system for vending a copy of a digital work comprising: a
processor; and a non-transitory computer-readable medium
communicatively coupled to the processor storing instructions that,
when executed by the processor, cause the system to: receive a
plurality of bids for access to the copy of the digital work from a
plurality of bidders; select from the plurality of bids: a first
bid from a first bidder, and a sample of one or more bids, wherein
first sample of one or more bids does not include the first bid;
generate, based on the first sample of one or more bids, at least
one threshold; determine that the first bid meets or exceeds the at
least one threshold; and provide access to the copy of the digital
work to the first bidder.
35. The system of claim 34, wherein the instructions are further
configured to cause the system to generate the at least one
threshold to maximize a quantity obtained by multiplying (a) a
number of bids of the sample of one or more bids that exceed the
threshold by (b) a bid value of a highest bid in the sample of one
or more bids that is less than or equal to the threshold.
36. The system of claim 34, wherein the copy of the digital work is
one of a plurality of identical copies of the digital work.
37. The system of claim 34, wherein the instructions are further
configured to cause the system to receive payment information from
the first bidder in an amount at least equal to the at least one
threshold.
38. The system of claim 34, wherein the instructions are further
configured to cause the system to select from the plurality of bids
the sample of one or more bids in a random fashion.
39. The system of claim 34, wherein the instructions are further
configured to cause the system to select from the plurality of bids
the sample of one or more bids in a quasi-random fashion.
40. The system of claim 34, wherein the instructions are further
configured to cause the system to provide secure access to the copy
of the digital work to the first bidder
41. The system of claim 34, wherein the instructions are further
configured to cause the system to provide access to the copy of the
digital work to the first bidder by sending the copy of the digital
work to the first bidder.
Description
RELATED APPLICATIONS
[0001] This application is a continuation of U.S. application Ser.
No. 11/262,031, entitled "Systems and Methods for Pricing and
Selling Digital Goods," filed Oct. 27, 2005, which is a
continuation of U.S. application Ser. No. 06/666,339, entitled
"Systems and Methods for Pricing and Selling Digital Goods," filed
Sep. 21, 2000, which issued as U.S. Pat. No. 6,985,885, which
claims priority from U.S. Provisional Application No. 60/155,458,
entitled "Systems and Methods for Pricing and Selling Digital
Goods," filed Sep. 21, 1999, all of which are hereby incorporated
by reference in their entireties.
COPYRIGHT AUTHORIZATION
[0002] A portion of the disclosure of this patent document contains
material which is subject to copyright protection. The copyright
owner has no objection to the facsimile reproduction by anyone of
the patent document or the patent disclosure, as it appears in the
Patent and Trademark Office patent file or records, but otherwise
reserves all copyright rights whatsoever.
FIELD OF THE INVENTION
[0003] The present invention relates to the sale and/or
distribution of goods and services. More particularly, the present
invention relates to systems and methods for pricing and/or selling
goods or services using randomized sampling and other auction
techniques.
BACKGROUND OF THE INVENTION
[0004] Improvements in digital recording and storage technology,
together with the proliferation of digital and analog communication
networks, have created a rapidly growing market for digital goods
and services. The nature of digital goods is such that they can be
reproduced at little cost. Thus, while it can be expensive to
produce an original work, the marginal cost of producing additional
copies is typically a negligible fraction of this initial cost. For
example, commercial sound recordings, business reports, computer
programs, and movies each typically cost a substantial sum to
create; however, near-perfect digital copies can be produced easily
and inexpensively using readily-available equipment. In the case of
musical recordings, for example, digital formats such as MPEG-1
Audio Layer 3, or MP3, enable high-quality copies of an original
recording to be stored and transmitted with relatively little
consumption of disk space or network bandwidth.
[0005] While increasing attention has been devoted to the
protection of digital and other electronic content from
unauthorized copying, distribution, and use, relatively little
attention has been paid to another fundamental problem facing the
vendor of digital goods--namely, the problem of maximizing the
value derived from the sale of those goods. Since digital goods can
be produced at negligible marginal cost, they can be supplied in
virtually unlimited quantities. Thus, the primary criteria for
determining the optimal sale price for a digital work will
typically be the utility value that consumers place on the work,
which for practical purposes can be approximated by the amount
consumers are willing to pay.
[0006] Accordingly, one measure of a digital work's value is the
aggregate utility that consumers derive from the work. A vendor
could recover this amount by charging each individual buyer the
maximum amount that each is willing to pay. For example, if a first
buyer valued a digitally-recorded movie at $5, a second buyer
valued the movie at $8, and a third buyer valued the movie at $1,
the vendor could maximize revenue by charging the first buyer $5,
the second buyer $8, and the third buyer $1 for a copy of the
movie. Of course, this amount will typically be unattainable in
practice, as consumers are generally unwilling to pay a higher
price than others for the same item simply because the item is more
valuable to them. As a result, vendors typically estimate consumer
utility via market analysis, and then use those estimates to set a
fixed price designed to maximize revenue. In the example described
above, for instance, the vendor could maximize revenue by setting
the fixed price at $5, thus obtaining a revenue of $10 (i.e., $5
from the first and second buyers). Pay-per-view movies are an
example of the use of fixed pricing for the sale of digital or
electronic content.
[0007] Determining an optimal fixed price can be a difficult task,
however, as it requires near-perfect knowledge of consumer
utilities. If the price is set too high, an insufficient number of
items may be sold; if the price is set too low, insufficient
revenue may be collected per item. In the example presented above,
if the vendor were to set the price at $6, he or she would only
obtain $6 in revenue, as only the second buyer would be willing to
purchase the movie. Similarly, if the price were set at $1, the
vendor would obtain only $3. Moreover, since the utility value of
an item may vary with time--for example, a consumer may not be
willing to pay as much for a movie that was released a year ago as
for a movie that was released yesterday--the vendor will need to
make periodic attempts to re-adjust the fixed price.
[0008] In the context of limited-supply goods, auctions are
sometimes used to determine the sale price. An advantage of an
auction is that if it is properly designed, it will set the price
for an item at or near the optimum fixed price. For example, in a
conventional English auction bidders compete against each other to
"win" an item at the bid price. Bidders continue raising the bid
price until it exceeds the utility value of enough of the other
bidders that the number of active bidders is equal to the number of
items to be sold. Thus, the winning bidders effectively pay some
increment above the utility value of the last bidder to withdraw
from the auction.
[0009] Another auction technique was presented by Vickrey in his
classic paper, Counterspeculation, Auctions and Competitive Sealed
Tenders, Journal of Finance, (16) 8-37 (1961). In a typical Vickrey
auction, bidders submit sealed bids to the auctioneer. If k items
are being sold, the k highest bids win, but pay a price equal to
the highest losing bid. That is, if the bids are ranked in
ascending order from 1 to n, the k highest bids each pay the
auctioneer an amount equal to the n-k highest bid. FIG. 1
illustrates a Vickrey auction in which ten bidders submit bids for
k items. As shown in FIG. 1, if k=1 the highest bidder--in this
case bidder 5, with a bid of $9--wins the auction and purchases the
item for $8, which is the amount of the second highest bid
(submitted by bidder 1). Similarly, if k=3 the three highest
bidders (i.e., bidders 1, 4, and 5) win the auction, and each
obtain one of the auctioned items for $6, which is the value of the
fourth highest bid. A characteristic of the Vickrey auction is that
each bidder has an incentive to bid his or her true utility value,
since the price that each winning bid will pay is independent of
the value of the winning bid itself. Accordingly, there is no
reason for bidders to try to guess what other bidders are bidding
and to bid incrementally above that value, as such a strategy runs
the risk of missing an opportunity to buy the item at a price that
is at or below the bidder's utility value, and does nothing to
lower the price that the bidder will ultimately pay for the item if
he or she wins. Auctions which encourage bidders to bid their true
utility values are sometimes referred to as "stable" or "truthful"
auctions.
[0010] Conventional auction techniques break down, however, if
there is an unlimited supply of the goods being auctioned, as is
the case with digital goods. (Note that "unlimited supply," as used
herein, refers generally to situations in which the seller has an
amount of items that equals or exceeds demand, and/or situations in
which the seller can reproduce items on demand at negligible
marginal cost). For example, if the English auction described above
were used to sell unlimited supply goods, bidders would have no
incentive to raise the price in successive rounds, since all bids
would be satisfied no matter what the bid value. Similarly, the
Vickrey auction would be ineffective, as each bidder would pay an
amount less than or equal to the lowest bid, which the bidders
could set at an arbitrarily low level, knowing that it would
nevertheless be satisfied. One way to avoid these problems is to
artificially limit the supply of goods. However, it is apparent
that this simply reintroduces the need for market analysis, since
the problem of determining how to optimally limit supply so as to
maximize revenue is typically no easier to solve than that of
determining an optimal fixed price.
[0011] Accordingly, there is a need for systems and methods which
enable the vendor of digital or other goods of unlimited supply to
sell those goods without resort to costly and error-prone market
analysis, yet which also enable the vendor to obtain a revenue
stream that is of approximately the same order of magnitude as the
revenue stream the vendor could receive if he or she had perfect
information about the market for the goods.
SUMMARY OF THE INVENTION
[0012] The present invention provides systems and methods for
pricing and selling goods and services of effectively unlimited
supply using novel auction techniques. It should be appreciated
that the present invention can be implemented in numerous ways,
including as a process, an apparatus, a system, a device, a method,
or a computer readable medium. Several inventive embodiments of the
present invention are described below.
[0013] In one embodiment, a system for vending copies of an
electronic work is disclosed. The system includes a computer for
receiving bids from one or more bidders, and bid sampling logic for
selecting (i) a bid from one of the bidders, and (ii) a sample of
one or more of the other bids. Processing logic is used to derive a
threshold from the sample of bids, and to determine, based on this
threshold, whether to vend a copy of the electronic work to the
bidder. The system may also include a network interface for sending
a copy of the electronic work to the bidder, and payment processing
software for collecting payment for the electronic work from the
bidder.
[0014] In another embodiment, a method is disclosed for
distributing copies of an electronic work. There may be an
effectively unlimited number of copies the electronic work, and the
maximum number of copies that are to be distributed need not be
specified in advance. In accordance with this distribution method,
a group of bids is received from one or more bidders. A bid is
selected from the group, as is a sample of bids drawn from the
group of remaining bids. A threshold value is derived from the
sample, and the selected bid is compared to the threshold. If the
selected bid is greater than or equal to the threshold, a copy of
the electronic work is sent to the bidder who submitted the
selected bid. This process can be repeated for each bid in the
group.
[0015] In yet another embodiment, a method for distributing an
electronic work is disclosed. A group of bids are received, and a
weighting factor is assigned to each bid. A first bid is selected
from the group of bids, and another bid is drawn from the group
using the weighting factors. For example, the weighting factors can
be used to make the probability of drawing a given bid from the
group proportional to the relative value of the bid in comparison
to the other bids in the group. The value of the first bid is
compared to the value of the bid that was drawn from the group, and
a copy of the electronic work is distributed to the bidder who
submitted the first bid if the first bid is greater than or equal
to the other bid.
[0016] These and other features and advantages of the present
invention will be presented in more detail in the following
detailed description and the accompanying figures which illustrate
by way of example the principles of the invention.
BRIEF DESCRIPTION OF THE DRAWINGS
[0017] The present invention will be readily understood by the
following detailed description in conjunction with the accompanying
drawings, wherein like reference numerals designate like structural
elements, and in which:
[0018] FIG. 1 illustrates the operation of a Vickrey auction.
[0019] FIGS. 2A, 2B, and 2C illustrate a system for practicing an
embodiment of the present invention.
[0020] FIGS. 3A, 3B, and 3C are flow charts illustrating
sampling-based optimal threshold auction mechanisms in accordance
with embodiments of the present invention.
[0021] FIGS. 4A and 4B illustrate the application of a dual-price,
optimal threshold auction mechanism to a set of bids.
[0022] FIG. 5 is a flow chart illustrating a method for conducting
an auction in accordance with an embodiment of the present
invention.
[0023] FIGS. 6A and 6B illustrate the application of a
weighted-pairing auction mechanism to a set of bids.
[0024] FIG. 7 illustrates the performance of exemplary auction
mechanisms when bids are distributed uniformly.
[0025] FIG. 8 illustrates the performance of exemplary auction
mechanisms when bids are distributed according to a normal
distribution.
[0026] FIG. 9 illustrates the performance of exemplary auction
mechanisms when bids are distributed according to a Zipf
distribution.
[0027] FIG. 10 illustrates the performance of exemplary auction
mechanisms when bids are distributed according to an equal-revenue
distribution.
[0028] FIG. 11 illustrates the performance of exemplary auction
mechanisms when bids are distributed in a bipolar fashion.
DETAILED DESCRIPTION
[0029] A detailed description of the present invention is provided
below. While the invention is described in conjunction with several
embodiments, it should be understood that the invention is not
limited to any one embodiment. On the contrary, the scope of the
invention is limited only by the appended claims, and the invention
encompasses numerous alternatives, modifications and equivalents.
For example, while several embodiments are described in the context
of a system and method for single-round, sealed-bid auctions for
goods of effectively unlimited supply, those skilled in the art
will recognize that the disclosed systems and methods are readily
adaptable for broader application. For example, without limitation,
the present invention could readily be applied in the context of
multi-round auctions, unsealed bid auctions, and/or auctions for
goods of limited supply. Moreover, while numerous specific details
are set forth in the following description in order to provide a
thorough understanding of the present invention, the present
invention can be practiced according to the claims without some or
all of these details. Finally, for the purpose of clarity, certain
material that is known in the art related to the invention has not
been described in detail in order to avoid obscuring the
invention.
[0030] The following U.S. patents and applications, each of which
is assigned to the assignee of the current application, are hereby
incorporated in their entirety by reference: Ginter et al.,
"Systems and Methods for Secure Transaction Management and
Electronic Rights Protection," U.S. Pat. No. 5,892,900, issued Apr.
6, 1999 ("the '900 patent"); Ginter et al., "Trusted Infrastructure
Support Systems, Methods and Techniques for Secure Electronic
Commerce, Electronic Transactions, Commerce Process Control
Automation, Distributed Computing, and Rights Management," U.S.
patent application Ser. No. 08/699,712, filed Aug. 12, 1996; Shear,
"Database Usage Metering and Protection System and Method," U.S.
Pat. No. 4,827,508, issued May 2, 1989; and Sibert, "Systems and
Methods for Using Cryptography to Protect Secure and Insecure
Computing Environments," U.S. patent application Ser. No.
09/628,692, filed Jul. 28, 2000 ("the Sibert application").
[0031] Systems and methods are described herein for enabling the
efficient pricing and sale of digital goods and/or other goods or
services with marginal production costs that are relatively small.
These mechanisms can also be advantageously applied in the context
of goods of limited supply and/or goods whose marginal cost of
reproduction is not small. In a preferred embodiment, a randomized
auction mechanism is used to determine both the number of goods
that are sold and the selling price. The auction mechanism
automatically adapts to the bid distribution to yield revenue that
is competitive with that which could be obtained if the vendor were
able to determine the optimal fixed price for the goods.
[0032] In one embodiment, a set of bids is randomly or
quasi-randomly partitioned into two or more groups. An optimal
threshold is determined for each group, and this threshold is then
used to select winning bids from one or more of the other groups.
In another embodiment, each bid is compared to a competing bid that
is randomly or quasi-randomly selected from the set of bids. If the
bid is less than the randomly-selected competing bid, the bid is
rejected. Otherwise, the bid is accepted and the bidder buys the
auctioned item at the price of the randomly-selected bid.
[0033] An illustrative system 200 for practicing an embodiment of
the present invention will now be described with reference to FIGS.
2A, 2B, and 2C. As shown in FIG. 2A, system 200 preferably
includes: [0034] one or more input terminals 210 for receiving bids
from users and for displaying information to users; [0035] at least
one server 211 for storing the item(s) to be auctioned and for
managing the auction; and [0036] communication media 212,
preferably including a computer network 214 such as the Internet,
for communicating information between terminals 210 and server
211.
[0037] As described in more detail below, in one embodiment bidders
submit bids electronically via network 214 to server 211. Server
211 is operable to send the bidders a list of the items being
auctioned and to facilitate entry of bids from terminals 210.
Server 211 is also preferably operable to identify the winning
bids, to accept and/or process payment for the auctioned item, and
to make and/or dispense a copy of the auctioned item to each of the
winning bidders. For example, server 211 might comprise a mainframe
computer or minicomputer running Microsoft.RTM. Site Server 3.0,
Commerce Edition software, available from Microsoft Corporation of
Redmond, Wash., and using the Auction component of the Site Server
software to facilitate implementation of the administrative aspects
of running an online auction.
[0038] As shown in FIG. 2B, server 211 may include: [0039] a
network interface 230 for connecting server 211 to network 214 and
for communicating with terminals 210; [0040] a magnetic and/or
optical disk drive 232 for reading and writing diskettes and/or CDs
containing content and program files; [0041] a non-volatile storage
unit 234, such as a hard disk drive, for storing content and
program files; [0042] a system memory unit 236, preferably
including both high-speed random access memory (RAM) and read only
memory (ROM), for storing system control programs, data, and
application programs loaded from disk drive 232, storage unit 234,
and/or network interface 230; [0043] a user interface 238,
including a display 240 and one or more input devices 242; [0044] a
system clock 243; [0045] a central processing unit (CPU) 244;
[0046] an optional random number generation circuit 245; and [0047]
one or more internal buses 246 for interconnecting the
aforementioned elements.
[0048] The operation of server 211 is controlled primarily by
control programs that are executed by the server's CPU 244. These
control programs may be stored in system memory 236. In a typical
implementation, the programs stored in system memory may include:
[0049] an operating system 246; [0050] a file handling system 248;
[0051] a set of user interface procedures 250, for handling input
from user interface 238 and for displaying output to the user on
display 240; [0052] one or more application programs 252; [0053] a
security module 253 for securely transmitting and receiving data to
and from network 214, display 240, and/or disk drives 232 and 234;
[0054] an auction control module 254, discussed in more detail
below, for managing an online auction, preferably including modules
for transmitting information to bidders; receiving bids; evaluating
bids to identify winners and losers; making copies of digital
content and transmitting those copies to the winning bidders;
obtaining and processing payments from the bidders; recording and
analyzing bid distributions; allowing the auctioneer to select the
auction mechanism to be used; and responding to auctioneer and/or
bidder queries regarding the nature of the auction.
[0055] As shown in FIG. 2A, bidders may communicate with server 211
via terminals 210. It will be appreciated that terminal 210 may
comprise any suitable mechanism for communicating a bid to server
211. For example without limitation, terminal 210 may comprise a
personal computer 210a, a personal digital assistant (PDA) 210b, a
television with set-top box 210c, or the like. As shown in FIG. 2C,
terminal 210 might include: [0056] a user interface 274, including
a display 276 and one or more input devices 278; [0057] a network
interface 280 for connecting terminal 210 to network 214 and for
communicating with server 211; [0058] storage media 284 operable to
store digital content downloaded from server 211; [0059] system
memory 286 for storing digital content and control and security
programs that govern the operation of the system and its
interaction with network 214 and input/output devices 278; [0060] a
central processing unit 288 for executing program instructions; and
[0061] one or more internal buses 290 for interconnecting the
aforementioned elements.
[0062] In a preferred embodiment, communication between server 211
and terminals 210 is performed using a secure protocol such as the
Secure Sockets Layer (SSL) protocol, the Internet Engineering Task
Force's (IETF) Transport Layer Security (TLS) protocol, and/or the
secure HTTP (S-HTTP) protocol to create an effectively secure
channel between the server and each terminal and/or to send
individual messages securely. For example, SSL can be used by
server 211 to verify the identity of a terminal 210 (and/or
vice-versa) before valuable content or sensitive financial
information is transmitted, and can also be used to facilitate
encryption of the information that is ultimately transmitted.
[0063] In one embodiment, information is sent between terminals 210
and server 211 using the methods and systems described in the '900
patent, previously incorporated by reference herein. For example, a
user's bid can be enclosed in a secure container and sent to server
211, where the secure container is opened and the bid removed.
Similarly, in one embodiment server 211 may be operable to send the
auctioned item to each winning bidder in a secure container, such
as a DIGIBOX.RTM. secure container produced by InterTrust
Technologies Corporation of Santa Clara, Calif. Moreover, a
preferred embodiment uses the systems and methods described, e.g.,
in the '900 patent, the Sibert application, and/or Menezes et al.,
Handbook of Applied Cryptography, pp. 543-590 (CRC Press 1996),
which is hereby incorporated by reference, to attach credentials to
the bids and/or the content, thus enabling bidders and/or
auctioneers to verify that the bids and auctioned items that they
receive have originated from trusted sources. It should be
appreciated, however, that the present invention is not limited to
a particular security system, and that any suitable container or
security scheme can be used. In some embodiments no special
security measures are used.
[0064] Similarly, it should be appreciated that while FIG. 2A
illustrates a system 200 in which bids are entered remotely at
computer terminals 210 and forwarded via network 214 to server 211
for processing and storage, in other embodiments other
configurations are used. For example, one of ordinary skill in the
art will appreciate that bids can be submitted via a variety of
additional and/or alternate means, including without limitation
facsimile, telephone, email, the postal system, and/or hand
delivery. These bids could then be entered manually into server 211
by the auctioneer and/or processed manually. Thus, it should be
understood that the system for processing bids shown in FIGS. 2A,
2B, and 2C is intended to be illustrative and not limiting.
[0065] In a preferred embodiment, auction control module 254
includes a variety of bid processing procedures 258 for conducting
an auction (or lottery) in accordance with the principles of the
present invention. Several illustrative procedures will now be
described with reference to FIGS. 3A-6.
[0066] In one embodiment, an optimal threshold for a
randomly-selected sample of the bids obtained by server 211 is used
to determine the outcome of some or all of the remaining bids. In a
preferred embodiment, the optimal threshold of the sample is one
that would maximize the revenue obtained from the sample. FIG. 3A
is a flow chart illustrating one such sampling-based threshold
technique. With reference to FIG. 3A, after gathering a set of bids
(310), a sample group of the bids is selected (312). In a preferred
embodiment, a pseudo-random sampling of the bids is taken, with the
size of the sample being chosen such that the properties of the
sample can be expected to be statistically representative of the
properties of the entire group of bids. For example, for a
relatively large number of bids, n, sample sizes of approximately
the square root of n or n/10 have been found to work well. However,
it will be appreciated that other suitable sample sizes could be
used in accordance with the principles of the present
invention.
[0067] Referring back to FIG. 3A, an optimal threshold for the
sample is determined (314), the threshold being a value that, e.g.,
maximizes the revenue that could be obtained from the sample. In
one embodiment the bids in the sample are then discarded (315).
That is, none of the bidders in the sample are allowed to purchase
the item, regardless of the price that they bid. This has the
beneficial effect of making the price that the winning bidders pay
independent of the value that they bid, thus encouraging each
bidder to bid his or her true utility value.
[0068] The threshold from the sample is then compared against the
values of the bids outside the sample (316-326). If a bid value is
greater than (or in some embodiments, greater than or equal to) the
threshold (a "yes" exit from block 320), then server 211 sends a
copy of the item to the bidder (322) and collects payment from the
bidder in an amount equal to the threshold (324). If, on the other
hand, the bid is less than or equal to (or in some embodiments,
less than) the threshold (i.e., a "no" exit from block 320), the
bid is rejected (318). In a preferred embodiment, when a bid is
rejected a message is sent to the bidder indicating that the bid
was unsuccessful. This process is repeated for each of the bids in
the remainder.
[0069] In another embodiment, a dual-priced technique is used to
avoid the loss of revenue that results from discarding the bids
used to set the threshold. FIGS. 3B and 3C illustrate this
technique. In this embodiment, the bids in the sample are not
discarded. Instead, a second threshold is determined by analyzing
the bids in the remainder (348). This threshold is then used to
determine whether the bids in the original sample are winners or
losers (350-360). Thus, the threshold used to select each winning
bid is chosen independently of the value of the winning bid itself,
and thus bidders are incentivized to bid their true utility values.
In a preferred implementation of this embodiment, the sample is
taken such that it is approximately equal in size to the group of
unsampled bids (i.e., the sample and the remainder are of
approximately equal size).
[0070] One of ordinary skill in the art will appreciate that the
order of the blocks shown in FIGS. 3A, 3B, and 3C can be varied
without departing from the principles of the present invention. For
example, in FIG. 3A blocks 318, 322, and 324 could simply comprise
the act of recording the status of b.sub.i (e.g., win or lose),
with all of the bids being processed together at the end of the
auction (e.g., rejection notifications sent, copies of the
auctioned item made, and/or payments processed). It will also be
appreciated that in some embodiments, some steps need not be
performed. For example, in a lottery embodiment, payment may not
need to be collected. Also note that in some embodiments payment
can be collected (or at least reserved) when the bids are initially
received--payment of a deposit, or demonstration of the ability to
pay, being a prerequisite to having a bid considered. In such
embodiments, funds can simply be released to the vendor once a bid
wins.
[0071] The technique illustrated in FIGS. 3B and 3C can be
generalized to the case where an arbitrary number of samples are
taken from the original set of bids, thresholds for each of the
samples are computed, and thresholds from one sample (or set of
samples) used to evaluate which bids in another sample win or lose.
Accordingly, it will be appreciated that there are numerous ways to
apply the techniques disclosed herein, any suitable one or more of
which could be used in accordance with the principles of the
present invention. For example, the original set of bids could be
divided into two groups in numerous different ways: at one extreme,
a single bid could be selected at random, and its value used as a
threshold against which the other bids are compared, while at
another extreme, each bid could be compared to the optimal
threshold of a "sample" consisting of the entire set of remaining
bids.
[0072] FIGS. 4A and 4B illustrate the application of a dual-priced,
random-sample, optimal threshold technique to a group of twenty
bids. As shown in FIG. 4A, the bids are randomly (or arbitrarily)
partitioned into two groups, shown as a shaded group and an
unshaded group. Next, the optimal threshold for each group is
calculated. As shown in FIG. 4B, the optimal threshold for the
shaded group of bids (i.e., the threshold that would yield the
greatest revenue if applied to the shaded group) is $2. This
threshold is applied to the bids in the unshaded sample, yielding a
revenue of $18 (i.e., all unshaded bids of $2 or greater pay $2).
Similarly, the optimal threshold for the unshaded sample is
determined--in this case it is also $2--and applied to the bids in
the shaded sample, yielding a revenue of $16.
[0073] Thus, in this example the auction mechanism is able to
achieve the same revenue as an optimal fixed pricing scheme, yet by
using the auction mechanism the vendor is able to avoid the costs
of performing the market research necessary to determine the
optimal fixed price. It can be shown that if, for example, the
highest bid is small in relation to the total amount of revenue
obtainable through optimal fixed pricing, then the expected revenue
of a random sample optimal threshold auction will be within a
constant factor of the revenue of the optimal single-price auction,
and will usually be very close to the revenue obtained using fixed
pricing with perfect market information.
[0074] Note that "random," as used herein, is intended to encompass
pseudo-random, quasi-random, effectively random, or arbitrary
processes, in addition to "truly" random processes. One of ordinary
skill in the art will appreciate that any suitable random number
generation technique can be used in accordance with the teachings
of the present invention, including without limitation those set
forth in Knuth, The Art of Computer Programming: Volume 2,
Seminumerical Algorithms, 3d ed., pp. 1-193 (Addison-Wesley 1998),
which is hereby incorporated by reference.
[0075] FIG. 5 is a flow chart illustrating another illustrative
method of conducting an auction for digital goods. In this
embodiment, an auction mechanism is implemented where for each bid
x, a different bid y is selected using a predefined selection
process that is effectively independent of x. If y is less than or
equal to x, the bidder who bid x wins and pays y. Otherwise the
bidder loses Referring to FIG. 5, a set of bids is gathered (510)
and weighted using a suitable weighting scheme (512). In a
preferred embodiment, the bids are weighted proportionally to their
bid value; however, one of ordinary skill in the art will
appreciate that other weighting schemes can be used. For example,
the weighting scheme need not be linearly proportional to bid
value. In other embodiments, no weighting scheme is used.
[0076] Referring once again to FIG. 5, each bid, b.sub.i, is
compared to a randomly selected competing bid, b.sub.k (513-524).
In a preferred embodiment, the random selection of a b.sub.k is
performed such that bids with higher weighting factors are
proportionally more likely to be selected than bids with lower
weighting factors. If b.sub.i>=b.sub.k (or, in some embodiments,
if b.sub.i>b.sub.k), then b.sub.i wins (517). If a bid wins, the
winning bidder is sent a copy of the auctioned item (520) and
payment is collected (522). If a bid loses, a message to that
effect is sent to the bidder (518). The process of selecting a
competing bid, b.sub.k, comparing it to a given bid, b.sub.i, and
determining whether b.sub.i wins or loses is repeated for each bid
in the original set of bids (524). One of ordinary skill in the art
will appreciate that the order of the blocks shown in FIG. 5 can be
varied without departing from the principles of the present
invention.
[0077] FIGS. 6A and 6B illustrate the application of the
weighted-pairing auction mechanism described above to a set of ten
bids. As shown in FIG. 6A, in a preferred embodiment each bid is
assigned a weight proportional to the value of the bid. In the
embodiment shown in FIG. 6A, this is accomplished by assigning each
bid, b.sub.i, a number equal to the sum of all the bid values
through b.sub.i. Using this weighting scheme, bids can be randomly
selected with a probability proportional to the individual bid
values simply by randomly generating a number between 1 and
.SIGMA.bid_values (in FIG. 6A, a number between 1 and 30) and
mapping that number back to its corresponding bid. For example,
with the weighting scheme shown in FIG. 6A, a random number, r,
maps to the bid, b.sub.k, for which
weight.sub.k-1<r<=weight.sub.k. It is to be understood,
however, that the weighting scheme shown in FIG. 6A, and the
implementation thereof, is provided for purposes of illustration,
not limitation, and that any suitable weighting scheme can be used
in accordance with the principles of the present invention. For
example, a weighted pool of bids could be created by duplicating
each bid a number of times proportional to the value of the bid,
then selecting each b.sub.k at random from the resulting pool. As
another example, in one embodiment the weighting is performed
separately for each b.sub.i--that is, for each b.sub.i the
remaining bids are weighted--which is equivalent to relocating
weighting block 512 in FIG. 5 such that it is located between
blocks 513 and 514.
[0078] FIG. 6B illustrates the result of applying the process shown
in FIG. 5 to the bids shown in FIG. 6A. For each bid, b.sub.i, a
competing bid, b.sub.k, is randomly selected using the weighted
selection scheme described above. In a preferred embodiment,
b.sub.k is selected from the set of all bids except for b.sub.i,
which can be accomplished by simply rejecting random numbers that
map to b.sub.i rather than to a unique b.sub.k. Each b.sub.i is
compared to its corresponding b.sub.k, and a determination is made
as to whether b.sub.i wins or loses based on whether b.sub.i is
greater than or equal to b.sub.k (or, in other embodiments, whether
b.sub.i is greater than b.sub.k). The vendor determines the
identity of the winning bidders in this manner, collects payment
equal to the appropriate value of b.sub.k for each bid, and sends a
copy of the auctioned item to each winning bidder. The weighted
pairing auction described above is multiple-priced and stable.
Moreover, as shown in FIGS. 7, 8, 9, 10, and 11, theoretical and
experimental results indicate that this auction performs relatively
well in comparison to other stable auction mechanisms.
[0079] One way to improve the performance of the weighted pairing
mechanism for some bid distributions is to pick a constant, g, and
to modify the auction so that b.sub.i wins if it is greater than
g*b.sub.k, and pays g *b.sub.k. In one preferred embodiment, g is a
constant between 0 and 1. In this embodiment, the modified auction
revenue will be at least g times the original auction revenue, but
has the potential to be much larger. In general, the effectiveness
of this technique, and the optimal choice of g, will depend on the
characteristics of the individual distribution--for example, it has
been found that this technique works well for g=0.99 on
distributions in which the bids are tightly clustered around a
single value.
[0080] The performance of the auction mechanisms presented herein
will typically vary somewhat according to the shape of the bid
distribution curve. FIGS. 7, 8, 9, 10, and 11 compare the
performance of optimal fixed pricing (i.e., the performance that
could be obtained with perfect market analysis) to the performance
of several embodiments of the present invention. In these plots,
the performance of various bid mechanisms--measured on the y-axis
as a percentage of the revenue obtainable by optimal fixed pricing
(F)--is plotted versus the total number of bids in the auction.
Curves for the following auction mechanisms are illustrated in
FIGS. 7, 8, 9, 10, and 11: [0081] Single-Price Optimal Threshold
(SSO). This auction mechanism is discussed in conjunction with FIG.
3A, and is one in which a random sample of sqrt(n) of the n bids
are used to set the threshold for the remaining n-sqrt(n) bids, but
are then discarded. [0082] Dual-Price Sampling, Optimal Threshold
(DSO). This auction mechanism is described above in connection with
FIGS. 3B, 3C, 4A, and 4B. [0083] Weighted Pairing (WP). This
auction mechanism is described above in connection with FIGS. 5,
6A, and 6B. [0084] Deterministic Optimal Threshold (DOT). This
auction mechanism is related to the DSO mechanism discussed in
connection with FIGS. 3B and 3C, and is one in which the optimal
threshold for a "sample" of n-1 bids is used to determine the
outcome of the remaining bid, this process being repeated for each
of the n bids. In addition, the performance of non-optimal fixed
pricing is illustrated (i.e., FP- and FP+); the curves for FP- and
FP+ show the revenue obtained when the optimal fixed price is
underestimated by 25% and overestimated by 25%, respectively.
[0085] FIG. 7 illustrates the performance of the exemplary auction
mechanisms when bids are distributed uniformly (e.g., randomly)
between a maximum bid of 1 and a minimum bid of 0. FIG. 8
illustrates performance when bids are distributed according to a
normal distribution curve with mean of 1 and standard deviation of
1 (negative bids are not included). FIG. 9 illustrates performance
when bids are distributed according to a Zipf distribution with
.theta.=0.5. As seen in FIGS. 8, 9, and 10, the random sampling
auction mechanisms perform particularly well on the uniform,
normal, and Zipf distributions, as these distributions are
characterized by the fact that a uniformly-chosen random subset of
the bids will, on average, have the same distribution as the
original distribution. In particular, it can be seen that for large
(or even moderately large) auctions, the auction mechanisms of the
present invention perform better than imperfect fixed pricing.
[0086] In FIG. 10 the distribution is such that the same revenue
can be obtained by setting the selling price to any bid value
(except for the highest) and satisfying all bids greater than or
equal to that value. As seen in FIG. 10, this bid distribution
represents a worst-case performance for several of the auction
mechanisms. Finally, FIG. 11 illustrates the performance of various
auction mechanisms when bids are clustered in a bipolar fashion
(i.e., bids are clustered at high and low values). In FIG. 11, the
performance of the auction mechanisms are plotted for various
bid-cluster configurations.
[0087] The information obtained by the auctioneer in a particular
auction can be useful in determining the optimal method by which to
sell additional copies of the goods in the future. For example, if
the auction mechanism encourages bidders to bid their true utility
values (i.e., is a stable auction mechanism), the auctioneer will
collect valuable data on consumer utility values and the
distributions thereof. Using these data, the auctioneer can adapt
future sales mechanisms to best match the distributions of utility
values observed in the market for the goods in question. Thus, for
example, if an auctioneer observes that consumer bids for a
particular type of digital goods are distributed according to an
equal-revenue distribution, the auctioneer can conduct future
auctions for this type of goods using a variant of the
weighted-pairing auction mechanism or the single-sample, optimal
threshold mechanism, both of which have been found to perform well
on such a distribution. Alternatively, the vendor could simply set
a fixed price at the optimal level derived from the auction
data.
[0088] As yet another example, if a bipolar distribution were
observed, the vendor could capitalize on consumer price
discrimination by offering a modified form of the goods which would
be less appealing to consumers who place a high utility value on
the item, but which would still be appealing to consumers who place
a low utility value on the item. For example, the vendor could
create a version of the goods that did not include some of the
features or functions valued by the high-end customers. The vendor
could then hold separate auctions for each class of goods, setting
a reserve price on the high-end version of the goods, the reserve
price being greater than the utility values exhibited by the
consumers of the low-end version. Thus, the use of a stable auction
mechanism enables the vendor to accurately observe market
distributions and to adapt in an optimal fashion.
[0089] Accordingly, in one embodiment auction application software
254 includes data analysis modules 262, which are operable to
record the bid distributions observed in actual auctions and to
determine an optimal auction mechanism and/or fixed price for the
observed bid distribution. In one embodiment, this determination is
performed by stepping through a library of auction mechanisms, and
iteratively optimizing the auction variables to maximize the
revenue derived from the auction. For example, the sample size of
the single-price optimal threshold mechanism could be optimized;
the choice of scaling factor g could be optimized; and so
forth.
[0090] Thus, several exemplary techniques have been presented for
conducting an auction for unlimited (or effectively unlimited)
supply goods. One of ordinary skill in the art will appreciate that
numerous variations can be made to the exemplary techniques set
forth herein without departing from the principles of the present
invention. Moreover, it should be understood that while the
techniques described herein can be advantageously applied in the
context of an auction for unlimited supply goods, these techniques
are readily adaptable to the context of limited supply goods as
well. For example, without limitation, the dual-price optimal
threshold mechanism can be adapted to an auction for k items by
simply selecting the optimal threshold for each sample to yield
approximately k/2 winning bids. If too many bids are selected, bids
can be randomly rejected until only k bids remain. One of ordinary
skill in the art will appreciate that other auction mechanisms
presented herein can be similarly adapted for use in the context of
limited supply goods.
[0091] Moreover, while the discussion has focused on the case in
which the marginal cost of producing copies of the auctioned item
is negligible, the systems and methods described herein are readily
adaptable to situations where this is not the case. For example, if
the marginal cost of producing an item is v, the vendor can simply
subtract v from all bids, automatically reject all negative bids,
and then conduct the auction using the remaining bids in the manner
previously described (with v added back to each bid). This
technique can thus be used to enforce a vendor's "reserve"
price.
[0092] Although the foregoing invention has been described in some
detail for purposes of clarity, it will be apparent that certain
changes and modifications may be practiced within the scope of the
appended claims. It should be noted that there are many alternative
ways of implementing both the processes and apparatuses of the
present invention. Accordingly, the present embodiments are to be
considered illustrative and not restrictive, and the invention is
not to be limited to the details given herein, but may be modified
within the scope and equivalents of the appended claims.
* * * * *