The Internet has allowed market-based systems to become increasingly pervasive. In this paper we explore the role of user interface (UI) design for these markets. Different UIs induce different mental models which in turn determine how users understand and interact with a market. Thus, the intersection of UI design and economics is a novel and important research area. We make three contributions at this intersection. First, we present a novel design paradigm which we call hidden markets. The primary goal of hidden markets is to hide as much of the market complexities as possible. Second, we explore this new design paradigm using one particular example: a P2P backup application. We explain the market underlying this system and provide a detailed description of the new UI we developed. Third, we present results from a formative usability study. Our findings indicate that a number of users could benefit from a market-based P2P backup system. Most users intuitively understood the give & take principle as well as the bundle constraints of the market. However, the pricing aspect was difficult to discover/understand for many users and thus needs further investigation. Overall, the results are encouraging and show promise for the hidden market paradigm.

The next decade will see an abundance of new intelligent systems, many of which will be market-based. Soon, users will interact with many new markets, perhaps without even knowing it: when driving their car, when listening to a song, when backing up their files, or when surfing the web. We argue that these new systems can only be successful if a new approach is chosen towards designing them. In this paper we introduce the general problem of “Hidden Market Design. ” The design of a “weakly hidden ” market involves reducing some of the market complexities and providing a user interface (UI) that makes the interaction seamless for the user. A “strongly hidden market ” is one where some semantic aspect of a market is hidden altogether (e.g., budgets, prices, combinatorial constraints). We show that the intersection of UI design and market design is of particular importance for this research agenda. To illustrate hidden market design, we give a series of potential applications. We hope that the problem of hidden market design will inspire other researchers and lead to new research in this direction, paving the way for more successful market-based systems in the future. 1

Market-based intelligent systems are becoming increasingly important in our everyday lives. However, when the goal of these systems is not the sale or purchase of items, traditional interfaces allowing users to specify bid or ask prices are no longer appropriate. Thus, there is a need for different kinds of user interfaces to interact with these “hidden markets”. In this paper, we present a novel user interface for one particular market-based system: a P2P backup application. The primary goal of the UI is to hide the market from the user as much as possible. Thus, the two main design challenges are how to provide current market information to the user without using prices or account balances, and how to elicit the user’s preferences with as little interaction as possible. The UI described in this paper is already implemented as part of a Microsoft research project on P2P backup systems and an internal alpha version of the software has been released. We are currently designing a usability study to evaluate the UI empirically. 1

Summary. Automated market makers are algorithmic agents that provide liquidity in electronic markets. We construct two new automated market makers that each solve an open problem of theoretical and practical interest. First, we formulate a market maker that has bounded loss over separable measure spaces. This opens up an exciting new set of domains for prediction markets, including markets on locations and markets where events correspond to the natural numbers. Second, by shifting profits into liquidity, we create a market maker that has bounded loss in addition to a bid/ask spread that gets arbitrarily small with trading volume. This market maker matches important attributes of real human market makers and suggests a path forward for integrating automated market making agents into markets with real money. 1.1

Abstract. Most existing market maker mechanisms for prediction markets are designed for events with a finite number of outcomes. All known attempts on designing market makers for forecasting continuous-outcome events resulted in mechanisms with undesirable properties. In this paper, we take an axiomatic approach to study whether it is possible for continuous-outcome market makers to satisfy certain desirable properties simultaneously. We define a general class of continuous-outcome market makers, which allows traders to express their information on any continuous subspace of their choice. We characterize desirable properties of these market makers using formal axioms. Our main result is an impossibility theorem showing that if a market maker offers binary-payoff contracts, either the market maker has unbounded worst case loss or the contract prices will stop being responsive, making future trades no longer profitable. In addition, we analyze a mechanism that does not belong to our framework. This mechanism has a worst case loss linear in the number of submitted orders, but encourages some undesirable strategic behavior.

Automated market makers are algorithmic agents that price fixed-odds bets with traders. Four key qualities for automated market makers have appeared in the artificial intelligence literature: (1) bounded loss, (2) the ability to make a profit, (3) a vanishing bid/ask spread, and (4) unlimited market depth. Intriguingly, market makers that satisfy any three of these desiderata have appeared in the literature. However, it is an open question as to whether there exist market makers which can simultaneously satisfy all four of these properties; the issue is not simple to resolve because several of the qualities are oppositional, particularly in tandem. In this paper, we answer the open question in the affirmative by constructing market makers that satisfy all four qualities.