Protecting suppliers' private information: the case of stock levels and the impact of correlated items

TL;DR

This paper proposes a marketplace model that protects suppliers' private stock information while enabling risk transfer through option pricing, considering correlated item availability.

Contribution

It introduces a novel marketplace framework with formulas for option pricing under different probability models, enhancing privacy and risk management.

Findings

Formulas for option prices under three probability models

Protection of supplier privacy in stock levels

Risk transfer via options in a privacy-preserving marketplace

Abstract

A marketplace is defined where the private data of suppliers (e.g., prosumers) are protected, so that neither their identity nor their level of stock is made known to end customers, while they can sell their products at a reduced price. A broker acts as an intermediary, which takes care of providing the items missing to meet the customers' demand and allows end customers to take advantages of reduced prices through the subscription of option contracts. Formulas are provided for the option price under three different probability models for the availability of items. Option pricing allows the broker to partially transfer its risk on end customers.