Danish Sugar Beet Auction

Last updated

The Danish Sugar Beet Auction was the first large-scale and practical application of secure multi-party computation, which took place in January 2008. [1] [2] [3] An electronic double auction was successfully run by a multiparty computation involving representatives of Denmark's only sugar beets processor (Danisco), the Danish sugar beet growers' association, and a research group responsible for implementing and running the computation. [2]

Due to European Union sugar market policy reforms which reduced sugar subsidies and lowered prices, [4] as well as the recent closure of one of Danisco's sugar processing plants, the Danish sugar beet industry needed to reallocate production contracts to farmers nation-wide in an attempt to retain market efficiency. The decision made was to hold an electronic double auction to find the new market clearing price of sugar beets, where the role of the "auctioneer" was played by a computer program implementing a secure multi-party computation (SMPC) between the farmers and Danisco.

The use of SMPC not only reduced expenses of the auction process (when compared to hiring an external consultancy to run the auction), but also allowed farmers' bids to remain private from Danisco, the only sugar beets processor on the Danish market and the seller of production contracts. [1] This was important as farmers' bids can reveal their individual economic positions and productivities, which Danisco could have hypothetically used to their advantage when selling contracts. In a survey of the auction participants, 80% of respondents indicated that it was important to them that the bids were kept confidential. [1]

Aside from organizing the logistics of such a novel auction, the actual computation of the market clearing price and each bidder's positions only took about 30 minutes to complete. [1] Ultimately, the auction resulted in the transfer of 25 thousand tons of production rights between farmers. [1]

Related Research Articles

<span class="mw-page-title-main">Commodity market</span> Physical or virtual transactions of buying and selling involving raw or primary commodities

A commodity market is a market that trades in the primary economic sector rather than manufactured products, such as cocoa, fruit and sugar. Hard commodities are mined, such as gold and oil. Futures contracts are the oldest way of investing in commodities. Commodity markets can include physical trading and derivatives trading using spot prices, forwards, futures, and options on futures. Farmers have used a simple form of derivative trading in the commodities market for centuries for price risk management.

<span class="mw-page-title-main">Sucrose</span> Disaccharide made of glucose and fructose

Sucrose, a disaccharide, is a sugar composed of glucose and fructose subunits. It is produced naturally in plants and is the main constituent of white sugar. It has the molecular formula C
12
H
22
O
11
.

<span class="mw-page-title-main">Auction</span> Process of offering goods or services up for bids

An auction is usually a process of buying and selling goods or services by offering them up for bids, taking bids, and then selling the item to the highest bidder or buying the item from the lowest bidder. Some exceptions to this definition exist and are described in the section about different types. The branch of economic theory dealing with auction types and participants' behavior in auctions is called auction theory.

An electricity market is a system that enables the exchange of electrical energy, through an electrical grid. Historically, electricity has been primarily sold by companies that operate electric generators, and purchased by consumers or electricity retailers.

A futures exchange or futures market is a central financial exchange where people can trade standardized futures contracts defined by the exchange. Futures contracts are derivatives contracts to buy or sell specific quantities of a commodity or financial instrument at a specified price with delivery set at a specified time in the future. Futures exchanges provide physical or electronic trading venues, details of standardized contracts, market and price data, clearing houses, exchange self-regulations, margin mechanisms, settlement procedures, delivery times, delivery procedures and other services to foster trading in futures contracts. Futures exchanges can be integrated under the same brand name or organization with other types of exchanges, such as stock markets, options markets, and bond markets. Futures exchanges can be organized as non-profit member-owned organizations or as for-profit organizations. Non-profit, member-owned futures exchanges benefit their members, who earn commissions and revenue acting as brokers or market makers; they are privately owned. For-profit futures exchanges earn most of their revenue from trading and clearing fees, and are often public corporations.

A cryptographic protocol is an abstract or concrete protocol that performs a security-related function and applies cryptographic methods, often as sequences of cryptographic primitives. A protocol describes how the algorithms should be used and includes details about data structures and representations, at which point it can be used to implement multiple, interoperable versions of a program.

Secure multi-party computation is a subfield of cryptography with the goal of creating methods for parties to jointly compute a function over their inputs while keeping those inputs private. Unlike traditional cryptographic tasks, where cryptography assures security and integrity of communication or storage and the adversary is outside the system of participants, the cryptography in this model protects participants' privacy from each other.

<span class="mw-page-title-main">Online auction</span> Auction held over the internet

An online auction is an auction held over the internet and accessed by internet connected devices. Similar to in-person auctions, online auctions come in a variety of types, with different bidding and selling rules.

The Western Sugar Cooperative is a grower owned American agricultural cooperative originating from the Great Western Sugar Company in 1901.

<span class="mw-page-title-main">Multiunit auction</span>

A multiunit auction is an auction in which several homogeneous items are sold. The units can be sold each at the same price or at different prices.

The Amalgamated Sugar Company is an American sugar beet-refining company run on a cooperative basis. It was founded in 1897 in Ogden, Utah, and is now located in Nampa, Idaho. The company markets its sugar under the White Satin brand.

<span class="mw-page-title-main">Energy Exchange Austria</span>

The Energy Exchange Austria (EXAA) is a Central European energy exchange headquartered in Vienna. Currently, the EXAA Market encompasses trading areas in the entire of Austria and Germany.

<span class="mw-page-title-main">Private electronic market</span>

A private electronic market (PEM) uses the Internet to connect a limited number or pre-qualified buyers or sellers in one market. PEMs are a hybrid between perfectly open markets and closed contract negotiations. The core idea of PEMs is to create competition among buyers/sellers while allowing buyers/sellers to adjust all those aspects of the deal that are typically only dealt with in a negotiation. This creates a problem of "comparing apples and oranges": bids may be quite different in many dimensions and therefore cannot easily be compared. Apart from the dimension of price these could include pre-negotiated discounts, specific qualities, combinations of goods and services with conditional pricing, freight differentials, contract fulfillment timing, payment terms, or deliberate constraints such as market share limits.

A smart market is a periodic auction which is cleared by the operations research technique of mathematical optimization, such as linear programming. The smart market is operated by a market manager. Trades are not bilateral, between pairs of people, but rather to or from a pool. A smart market can assist market operation when trades would otherwise have significant transaction costs or externalities.

The Utah-Idaho Sugar Company was a large sugar beet processing company based in Utah. It was owned and controlled by the Church of Jesus Christ of Latter-day Saints and its leaders. It was notable for developing a valuable cash crop and processing facilities that was important to the economy of Utah and surrounding states. It was part of the Sugar Trust, and subject to antitrust investigations by the U.S. Department of Justice, the Federal Trade Commission, and the Hardwick Committee.

<span class="mw-page-title-main">Sugar production in the Danish West Indies</span> Historical sugar production in the US Virgin Islands

Sugar production in the United States Virgin Islands was an important part of the economy of the United States Virgin Islands for over two hundred years. Long before the islands became part of the United States in 1917, the islands, in particular the island of Saint Croix, was exploited by the Danish from the early 18th century and by 1800 over 30,000 acres were under cultivation, earning Saint Croix a reputation as the "Garden of the West Indies". Since the closing of the last sugar factory on Saint Croix in 1966, the industry has become only a memory.

<span class="mw-page-title-main">Ebidding</span>

An ‘‘‘electronic bidding system ‘‘‘ is an electronic bidding event according to defined negotiation rules (eAgreement). A buyer and two or more suppliers take part in this online event.

The sugar industry of the United States produces sugarcane and sugar beets, operates sugar refineries, and produces and markets refined sugars, sugar-sweetened goods, and other products. The United States is among the world's largest sugar producers. Unlike most other sugar producing countries, the United States has both large and well-developed sugarcane and sugar beet industries. Refined sugarcane, processed sugar beet, and high-fructose corn syrup are all commonly used in the U.S. as added sugars to sweeten food and beverages.

<span class="mw-page-title-main">Cosun Beet Company</span> Dutch sugar company

Cosun Beet Company is a part of Royal Cosun. It produces white sugar and other refined sugar products. By acquiring the beet sugar division of Corbion in 2007 and Danisco Sugar GmbH in 2008, Cosun Beet Company became one of the five biggest European producers of sugar from sugar beet.

Alok Gupta is an American information scientist, economic engineer, and academic. He is the Professor of Information and Decision, a Senior Associate Dean of Faculty, Research and Administration, and Curtis L. Carlson School Wide Chair in Information Management in the Carlson School of Management at the University of Minnesota.

References

  1. 1 2 3 4 5 Bogetoft, Peter; Christensen, Dan Lund; Damgård, Ivan; Geisler, Martin; Jakobsen, Thomas; Krøigaard, Mikkel; Nielsen, Janus Dam; Nielsen, Jesper Buus; Nielsen, Kurt; Pagter, Jakob; Schwartzbach, Michael (2009). "Secure Multiparty Computation Goes Live". In Dingledine, Roger; Golle, Philippe (eds.). Financial Cryptography and Data Security. Lecture Notes in Computer Science. Vol. 5628. Berlin, Heidelberg: Springer. pp. 325–343. doi:10.1007/978-3-642-03549-4_20. ISBN   978-3-642-03549-4.
  2. 1 2 Gomi, Kazuhiro. "Council Post: Multi-Party Computation: Private Inputs, Public Outputs". Forbes. Retrieved 2021-11-11.
  3. "Nyt krypteret online-system regner på hemmelige tal". videnskab.dk (in Danish). 2008-04-22. Retrieved 2021-11-11.
  4. Bogetoft, Peter; Boye, Kristoffer; Neergaard-Petersen, Henrik; Nielsen, Kurt (1 March 2007). "Reallocating sugar beet contracts: can sugar production survive in Denmark?". European Review of Agricultural Economics . 34: 1–20. doi:10.1093/erae/jbm002 via Oxford University Press.