Stev en O. Ki m br oug h & D . J. W u F ormal Mo d el ling for ...opim.wharton.upenn.edu/~sok/fmec/fmec-book-intro.pdfth anks, h ow ev er, go to four senior in div idu als w h o ha

Steven O. Kimbrough & D. J. Wu

Formal Modelling for ElectronicCommerce: Representation, Inference,and Strategic InteractionSPIN Springer’s internal project number, if known

Springer

Berlin Heidelberg NewYork

Barcelona Budapest Hong Kong

London Milan Paris

Santa Clara Singapore Tokyo

Preface

Questions abound.

• What is the deep structure of a purchase order, or for that matter anyother business document, such as an invoice, bill of lading, receiving re-port, or contract? How can a purchase order (or other document) berepresented so that organizations may—automatically, without direct hu-man involvement—create, send, reason correctly about, and act properlyon the purchase order (or other document)?

• How may a purchase order (or other business document) be structuredwithout ad hoc-ness, so that it may be used by automated agents every-where?

• Beyond sending simple messages, how can the need of organizations toconduct extended conversations automatically be supported?

• Is it possible, and if so how, for artificial agents to negotiate contractsand trade procedures? What are the possibilities? the limitations?

• What are the underlying principles of reasoning about such subtle con-cepts as obligations, permissions, actions, and norms? How might theseprinciples be formalized and employed generally in electronic commerceautomation?

• How can artificial agents discover and learn strategies that are effective incommercial—hence, game-theoretic—contexts? What are the candidatelearning regimes and what are their performance characteristics? Willthey be exploitable? Will they be exploiting?

• What are the behavioral characteristics of markets and other commercialtransaction spaces when populated by artificial agents that are intelligent,adaptive, and learning? Will they be stable? Will they be efficient?

These questions, and many other questions like them, matter because impor-tant prospective advances in electronic commerce—the progressive automa-tion of the conduct of business—depend on answering them. The questionsare deep. They merit and will receive enduring attention. It is widely agreedthat the state-of-the-art on these questions calls for intensive and protractedattention. Happily, the issues they raise admit of imperfect solutions, whichmay profitably be translated into practice, then replaced as knowledge im-proves. The scene is dynamic and filled with opportunities, both for funda-mental contributions and for transfer of knowledge to practice.

The FMEC (Formal Modeling for Electronic Commerce) community is aninformal, diverse, international, and very open group of researchers, who sharean interest in these questions. The community has been operating activelysince 1987, and has produced nearly a score of workshops (with attendantpapers), nine special issues of journals (totaling 59 papers), and at least 21Ph.D. theses. In addition, several score papers have appeared in journals,

VI Preface

conferences, and workshops. The community has been fecund in its ideas andprolific in its published output.

The purposes of this volume are several:

• To present the latest work from the FMEC communityThe book contains 14 new papers, representing the best of the currentFMEC work.

• To present FMEC papers of historical and conceptual import, which arenot otherwise available in the open literatureThe book contains 5 such papers.

• To provide an historical and, mainly, conceptual guide to the issues thathave been addressed by the FMEC communityThe book’s first chapter provides an integrating essay on FMEC work. Itwill be a useful guide to the reader of this book and to the researcher whowishes to probe further. In addition, the book contains a unified masterbibliography of several hundred entries, as well as a comprehensive index.

We hope, and believe, this volume will be useful for researchers and grad-uate students with interests in electronic commerce or in the fundamentalissues engaged by the questions listed above. Practitioners, especially thoseinvolved in research or development of leading-edge systems, will also findhere much to reckon with. Most, if not all, of the ideas explored here are ripefor conversion to applications.

We end with a note of thanks. Since 1987, dozens of people have madeimportant contributions to the creation and maintenance of the FMEC com-munity. We thank them all, even if it is not possible to name them all. Specialthanks, however, go to four senior individuals who have been exemplary inthe support and encouragement they have given this community.

• Melvin F. Shakun, editor of Group Decision and Negotiation• Ralph H. Spague, Jr., organizer of the Hawaii International Conference

on System Sciences• Andrew Whinston, editor of Decision Support Systems• Vladimir Zwass, editor of Journal of Management Information Systems

and International Journal of Electronic Commerce

Finally, thanks to Mike Shaw for suggesting this project and to the editorsat Springer for their patience.

Bala Cynwyd, PA and Atlanta, GA Steven O. KimbroughSeptember 2004 D.J. Wu

Contents

Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V

FMEC: Overview and Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . 1Steven O. Kimbrough, D.J. Wu1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Formalisms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Themes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 Topics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 A Brief Guide to the Volume . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76 Upwards and Onwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137 Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18A FMEC Bibliographic History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Part I. Representation: Objects, Processes & Policies

Practical Contract Storage, Checking, and Enforcement forBusiness Process Automation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33Alan Abrahams, David Eyers, Jean Bacon1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 332 Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 353 Application Scenario . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 364 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 375 Occurrences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 406 Kimbrough’s Disquotation Theory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 457 An Implementation of Kimbrough’s Disquotation Theory . . . . . . . . . 478 Contract Provision Monitoring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 599 Contract Performance and Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . 6110 Software Implementation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6511 Related Work . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7112 Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7213 Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73A Coverage Checking Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74

Legitimacy Checking in Communicative Workflow Design . . . . . 79Aldo de Moor, Hans Weigand1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 792 The Extended Workflow Loop . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 813 Extended Workflow Loop Norms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 824 Workflow Loop Schemas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 865 A Method for Legitimacy Checking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89

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6 Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97

CANDID Specification of Commercial and Financial Contracts,Part I: Syntax & Formal Semantics of CANDID . . . . . . . . . . . . . . 101Ronald M. Lee1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1012 The Language L1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1033 Re-Interpretation of Predicates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1064 Many-Sorted, Type-Theoretic Languages . . . . . . . . . . . . . . . . . . . . . . . . 1075 λ Abstraction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1086 Operations, Definite Reference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1107 Summary of the Language Lv . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1118 Character Strings, Labels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1149 Numbers and Measurement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11510 Time, Realization, Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11711 Possible Worlds, Intensions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12212 Summary of the Language IL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12513 Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13014 Modals, Deontic Operators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13115 Summary of the Language CANDID . . . . . . . . . . . . . . . . . . . . . . . . . . . 136

CANDID Specification of Commercial and Financial Contracts,Part II: Formal Description of Economics Actors and Objects 145Ronald M. Lee1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1452 Economic Actors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1503 Economic Objects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1534 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157

CANDID Specification of Commercial and Financial Contracts,Part III: CANDID Specification of Financial Concepts . . . . . . . 159Ronald M. Lee1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1592 Additional Definitions, Notational Conventions . . . . . . . . . . . . . . . . . . 1603 Elementary Financial Concepts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1614 Financial Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1675 Concluding Remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176

Performatives, Performatives Everywhere but Not a Drop ofInk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177Ronald M. Lee1 Performative Aspects of Commerce and Public Administration . . . . 1772 Issues for Open Electronic Commerce . . . . . . . . . . . . . . . . . . . . . . . . . . . 1863 From Ink to Bits: Original, Signed Writings . . . . . . . . . . . . . . . . . . . . . 1884 Computational Modeling of Documentary Procedures . . . . . . . . . . . . . 1925 Protocols for Procedure Adoption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 194

Contents IX

6 Discussion and Further Research Directions . . . . . . . . . . . . . . . . . . . . . 1977 Acknowledgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 198

EDI, XML, and the Transparency Problem in ElectronicCommerce . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 201Steven O. Kimbrough1 EDI and the Transparency Problem . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2022 XML’s Pertinent Virtues and Limitations . . . . . . . . . . . . . . . . . . . . . . . 2033 Communications Requisites . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2064 microFLBC and the Transparency Problem . . . . . . . . . . . . . . . . . . . . . 2115 Back to XML . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2216 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 224

Part II. Applications

Designing Control Mechanisms for Value Exchanges inNetwork Organisations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 231Vera Kartseva, Yao-Hua Tan1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2312 A Methodology for Designing Control Mechanisms . . . . . . . . . . . . . . . 2333 Modelling Business Value Models . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2344 Modelling Sub-Ideal Situations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2365 Distinguishing Different Types of Control Mechanisms . . . . . . . . . . . . 2436 Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 244

Sim-I-Space: An Agent-Based Modelling Approach toKnowledge Management Processes . . . . . . . . . . . . . . . . . . . . . . . . . . . 247Max Boisot, Ian MacMillan, Kyeong Seok Han, Casey Tan, Si HyungEun1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2472 Model Architecture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2483 Model Components . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2524 Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 263A Description of Variables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 263B Detailed Model Specification with Example . . . . . . . . . . . . . . . . . . . . . 278

Part III. Communication

On Representing Special Languages with FLBC:Message Markers and Reference Fixing in SeaSpeak . . . . . . . . . . 297Steven O. Kimbrough, Yinghui (Catherine) Yang1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2972 Special Languages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2983 Two Problems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 300

X Contents

4 Background on SeaSpeak . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3025 Prototype Example: INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . 3046 Problems of Reference Fixing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3077 Formalizing Distributed Descriptions into FLBC . . . . . . . . . . . . . . . . . 3128 Analysis of the Remaining SeaSpeak Message Markers . . . . . . . . . . . . 3159 Discussion and Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 320

A Note on Modelling Speech Acts as Signalling Conventions . . 325Andrew J.I. Jones, Steven Orla Kimbrough1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3252 Asserting: Two Prototypes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3263 Other Speech Acts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3304 Discussion: Towards Deployment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3345 Summary and Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 339

Dynamic Conversation Structures: An Extended Example . . . . 343Scott A. Moore1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3432 Extended Example . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3453 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 359

Part IV. Agents and Strategic Interactions

Investigating the Value of Information and ComputationalCapabilities by Applying Genetic Programming to SupplyChain Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 363Scott A. Moore, Kurt Demaagd1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3632 The Evolutionary Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3663 Plan of Investigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3804 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 387A Terminals and Functions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 388B Settings for a Scenario . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 389C Computing-Related Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 390

Multi-Agent Simulation of Financial Markets . . . . . . . . . . . . . . . . . 393Olga Streltchenko, Yelena Yesha, Timothy Finin1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3932 Automation of Modern Financial Markets . . . . . . . . . . . . . . . . . . . . . . . 3943 Simulation of Financial Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3994 A Multi-Agent Environment for Financial Market Simulation . . . . . . 4045 Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 416

Contents XI

Adaptive Agents in Coalition Formation Games . . . . . . . . . . . . . . 421Alex K. Chavez1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4212 Background and Description . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4223 Learning Models . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4254 Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4305 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4356 Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 437A Parameter Estimates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 438

On Learning Negotiation Strategies by Artificial AdaptiveAgents in Environments of Incomplete Information . . . . . . . . . . . 445Jim R. Oliver1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4452 Overview of the Approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4483 AAA Platform . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4484 Structure of the Bargaining Space . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4515 Experimental Testing and Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4536 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 459

A Note on Strategic Learning in Policy Space . . . . . . . . . . . . . . . . 463Steven O. Kimbrough, Ming Lu, Ann Kuo1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4632 Background: Games and Decisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4633 Repeated Games . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4664 Simple Reinforcement Learning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4675 Learning in Policy Space . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4696 Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4737 Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 474

Learning and Tacit Collusion by Artificial Agents in CournotDuopoly Games . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 477Steven O. Kimbrough, Ming Lu, Frederic Murphy1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4772 The Duopoly Game: Holt’s Cournot Model . . . . . . . . . . . . . . . . . . . . . . 4783 Background and Application Context: Electricity Markets . . . . . . . . . 4794 Framework for Agent Learning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4815 Molecular Strategies in the Cournot Game . . . . . . . . . . . . . . . . . . . . . . 4836 Summary of Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4867 Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4878 Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 490

XII Contents

A Note on Working Memory in Agent Learning . . . . . . . . . . . . . . 493Fang Zhong1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4932 The Exchange Game . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4943 Learning Mechanism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4974 Experiments on Working Memory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4995 Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5046 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5057 Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 506A Parameter Values . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 506

Investigations of Granularity and Payoffs in 2×2 Games underReplicator Dynamics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 509Sofia Chajadine, Daniel Mack, Aaron Jeffrey Slan1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5092 The Games . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5103 Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5144 Discussion of Findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5165 Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 525A Summary of Simulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 525

Part V. References and Index

References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 531

Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 557

FMEC: Overview and Interpretation

Steven O. Kimbrough1 and D.J. Wu2

1 University of Pennsylvania, Philadelphia, PA, USA,[email protected]

2 Georgia Institute of Technology, Atlanta, GA, USA,[email protected]

Abstract. This paper is an integrative essay on the activities and intellectual con-cerns of the FMEC community. The paper frames these concerns around three‘non-standard’ formalisms (logic, graphs, and procedures), three themes or generalproblems (representation, inference, and learning), and seven more specific topics(electronic data interchange, electronic contracting, speech acts, special logics, sys-tem and process modelling, strategy formation, and computational discovery). Inaddition, the paper introduces each of the chapters in this book and places themwithin the general FMEC framework. An appendix to the paper records the bibli-ographic history of the FMEC community.

1 Introduction

Electronic commerce is an attractive field for anyone interested in originatingfresh ideas or in innovatively translating them into practice. Underlying tech-nical progress in computing and communications continues a torrid advance.In consequence the deployment, full exploitation, and even conception of ap-plications enabled by technical progress inevitably lag and go unrealized, atleast for a time, sometimes a considerable time. Thus is created a permanent(if moving) frontier, open to insight and rewarding it.

Electronic commerce is equally attractive to those with a taste for fun-damental challenges and with aspiration to make foundational contributions.The general challenge is “to expand the realm of the automated in a princi-pled and generalized fashion.”1 To take up this challenge is to be confrontedwith any number of fundamental problems, calling for fundamental insightand innovation.

The papers in this volume address both kinds of challenges—e-commerceapplication challenges and e-commerce fundamental challenges—in detail. Itwill be useful, for the sake of interpreting these papers, to frame what it isthat the FMEC community has been about. For that purpose, three facets orperspectives will serve to characterize, at least roughly, the intellectual con-cerns that have drawn the attention of researchers in the FMEC community:1 Since the early 1980s, this has been Steven O. Kimbrough’s slogan for character-

izing the mandate of Information Systems as a discipline.

2 Steven O. Kimbrough and D.J. Wu

• Formalisms• Themes• Topics

2 Formalisms

Formal modelling requires some formalism or other in which to express mod-els. Moreover, electronic commerce is a capacious area of research and muchformal modelling has long been directed at it. What distinguishes FMEC?How is it different from standard modelling work, say, in economics, or themanagement sciences? The FMEC community may perhaps best (but al-ways approximately) be described as having focused on non-standard formalmodelling for electronic commerce. What we may call the standard modellingformalism employs broadly algebraic (or equational) models of various sorts.The literatures of economics, the management sciences, and the various busi-ness disciplines (e.g., marketing, finance) are suffused with models using thestandard formalism(s). Moreover, modelling in this style has been presentand welcomed in the FMEC literature.2

From the outset, however, the FMEC community has been interested inproblems and topics for which other formalisms are most naturally used.These other, ‘non-standard’ formalisms have been of broadly three kinds:

• Logic• Graphs• Procedures

Logic. The origin of the FMEC community was a series of Logic Modellingminitracks at the HICSS meetings (Hawaii International Conference on Sys-tem Sciences), beginning in January 1987 (see §A, below). From the outset,and continuing to the present, a large segment of the FMEC community hasfocused on the use of formal logic as a modelling tool. The opening article inthe first FMEC special issue, “Logic Modeling: A Tool for Management Sci-ence” [KL88], presents the case. In a nutshell, the promise of logic modellingis that:

1. Logic models are natural representational formalisms for any target sys-tem that is propositional, such as documents and messages used to con-duct business.

2. Logic models afford construction of clear and rigorous models; and theybring with them the considerable foundational underpinnings of formallogic.

3. Via the logic programming paradigm, logic models are readily imple-mented and translated into applications. In this context, we may thinkof a logic model as an ‘executable theory’.

2 E.g., [Jer88,BCK00,Wu97]

FMEC: Overview and Interpretation 3

Close to half of the FMEC papers appearing either in this volume or inthe ten previous special issues of journals (see §A.2, below) employ a logicformalism.

Graphs. Graphs—articulated structures of nodes and arcs—are an espe-cially apt formalism for electronic commerce.

1. Graphs are natural representational formalisms for processes (e.g., tradeprocedures, workflow processes) and indeed for systems. UML and allother formalisms used in systems analysis and design are largely graph-based. Networks—social, trading, transportation, etc.—appear regularlyin e-commerce contexts, and networks are special kinds of graphs.

2. Graphs afford construction of clear and rigorous models; and they bringwith them extensive theoretical underpinnings.

3. Graph models are easily implemented. In fact, they are special cases oflogic models and are naturally implemented via logic programming.

4. Graph models are familiar to many people and afford excellent visualiza-tions.

Procedures. A procedural or computational model seeks to account for—toexplain or illustrate—its target system [Kim03]. Standard, equational mod-els have the same purpose. For that matter, so do logic models and graphmodels. We identify a system of interest; we develop a model or formal repre-sentation (including the proposed correspondence between the model and thetarget system); and then we observe the behavior of the two. If the model’sbehavior matches the target system’s behavior in the right ways, we congrat-ulate ourselves on a good job and are prepared to rely upon the model inmaking predictions and in otherwise directing our own behavior.

Perhaps the clearest example of an explicitly procedural explanation isthe Darwinian theory of evolution. There are no equations in The Originof Species and the theory has not been successfully axiomatized. Equationalmodels are used—extensively—to model the behavior of evolutionary sys-tems, but not to model the basic theory itself. See for details the quotedpassage on the next page, taken from [Kim03].


It is by now standard to note that evolutionary theories of adap-tation (e.g., Lamarck’s and that of Charles’s grandfather ErasmusDarwin) predated The Origin of Species (1859). Darwin’s achieve-ment was not to originate a theory of evolution. Rather it was(with Alfred Russell Wallace) to propose a workable (and largelycorrect) mechanism or procedure by which evolution comes about.In fact, Darwin did not use the term evolution in the first edition ofthe Origin. Instead, he consistently wrote of his theory of “descentwith modification by natural selection.” Most fundamentally (andsufficient for present purposes) Darwin (and Wallace) put togetherthree ideas or observations:

1. Profusion of individuals with variance of traitsEvery species has the capability to, and tends to, produce moreoffspring each generation than can possibly survive and repro-duce. The individuals so produced are not all identical.

2. Selection among the variantsNatural selection operates on populations of varying individu-als, selecting for properties favorable to survival and reproduc-tion.The individuals in a species vary in many different ways, in-cluding their capacity, at least in expectation, for survival andreproduction.

3. Reproduction of variants favored by selection, with inheritanceof favorable traits.Inheritance may be approximate and far from perfect. What isrequired is a heritable association between the traits favorableto the parents and the traits of their offspring.

Given such a regime—of profusion with variance of traits, selectionby traits, and reproduction with inheritance—it is nearly inevitablethat evolution or “descent with modification by natural selection”will occur. Darwin and Wallace claimed that in fact it did routinelyand that this process has in the main been responsible for adapta-tion and speciation. Such, boiled down for present purposes, is the(biological) theory of evolution by natural selection.a So success-ful has this theory become that now when we say something is anevolutionary theory or account, we mean it appeals to, or posits, aprofusion-selection-reproduction process.a For a more detailed analysis see [Kim80].


3 Themes

A number of themes, or general problems, have been prevalent among variousFMEC contributors. It is convenient to list them as follows:

• Representation• Inference• Learning

Representation. The first and most pervasive theme was the impetus forRonald M. Lee’s seminal Ph.D. dissertation, describing his CANDID sys-tem.3 Lee’s problem was how to represent business entities, including actors,economic objects, financial entities and instruments, and business documents(such as invoices and purchase orders). We might call this the representationtheme in e-commerce. It leads to conceptual analysis with formal presentationof the results.

Lee’s thought was to model the gamut of business entities using a formal,broadly logical language. Lee’s work is extensive but incomplete and oftenprogrammatic. His reliance on Montague semantics may pose severe problemsfor implementation. Nevertheless, his results and insights are important. Fur-ther, the inherent subtlety and difficulty, along with the potential usefulness,of the project may fairly be said to have inspired a body of research thatcontinues to this day and that has been central to the FMEC community.Much has been achieved and much remains to be done. Lee’s dissertationhas until now appeared only in working paper form. We are very pleased topresent an updated version in this volume. The new CANDID manuscriptconstitutes three chapters in Part I, pages 101–176.

Inference. Inference is the second theme that has occupied the attentionof FMEC researchers. There has been a shared vision, not often explicitlyarticulated in print,4 of having general, widely-used deductive databases forreasoning in electronic commerce about obligations, time, actions, contracts,trade procedures, and so on, and to be able to do so defeasibly.

Learning. Interest in learning, the third major theme in FMEC research,has been occasioned by the shared vision of having very powerful—AAAA(“anything, any time, anywhere, anywise”)—artificial agents present on theInternet, doing business on our behalf. Because these agents will be inter-acting with other agents (artificial or not), they will be acting in strategicor game-theoretic contexts. Because classical game theory has little to sayabout how to pick a strategy for play in a game and because many of the3 See [Lee80].4 But see [KM93a].


strategic contexts of electronic commerce will involve repetitions of simplergames, having the artificial agents learn which strategies to play becomesimperative. Understanding what agents will learn under various regimes ofplay and kinds of learning is very much an open issue, although significantresults are reported in this volume.

4 Topics

Quite a number of more specific topics—falling within the general themes—have been investigated by the FMEC community. We now provide, with briefdiscussion, a representative list.

• Electronic data interchange.The term electronic data interchange is used as an abstract, more gen-eral term for EDI (Electronic Data Interchange) in the sense denotinguse of specific protocols, such as X12 and UN/EDIFACT, or protocolslike them. The topic of electronic data interchange covers the generalproblem of designing effective and powerful protocols (or more generallylanguages) for conduct of business. Not only must standard documents,such as invoices, purchase orders, and bills of lading, be represented, butconversations must be held, trading agreements made and so on. Much ofthe FMEC work on this topic is self-described as working on an FLBC,a Formal Language for Business Communication.

• Electronic contracting.This is closely related to the electronic data interchange topic. How canartificial agents effectively compose, evaluate, monitor, and be directedby contracts in electronic form? Much of the FMEC work has focusedon analysis and representation of trade procedures, with the view thatlibraries might be created upon which agents might draw in negotiatingdeals. An important part of the electronic contracting topic is the firsttrade problem. A main cause of the high expense of EDI is the cost ofsetting up the contractual arrangements for making the first trade. Oncethat is done, if done well, the incremental costs of EDI (more generally,electronic data interchange) may be quite modest.

• Speech acts.Contracts and other business documents (the usual: invoices, purchaseorders, bills of lading, etc.) are propositional. They make assertions, is-sue promises, give commands, and so on. Individual assertions, promises,commands et cetera are widely recognized as speech acts. They say thingsand they do things. Speech acts are essential to business communication,yet their logical structure is problematic. FMEC researchers have beenmuch concerned with exploring how speech acts should be representedformally, so that artificial agents may undertake them and reason aboutthem.


• Special logics.FMEC researchers have investigated logics of defeasible reasoning, ac-tion, deontic reasoning, modal reasoning, epistemic reasoning, temporalreasoning, institutional power, and reasoning about speech acts—all asapplicable to electronic commerce.

• System and process modelling.FMEC researchers have expended much attention on developing graphmodels (usually) or logic models (less usually) for representing workflows,trade procedures, and other processes of import to electronic commerce,as well as systems in which such processes occur.

• Strategy formation.FMEC researchers have produced a now extensive body of work (themost recent of which is contained in this volume) exploring how variouscomputational learning regimes fare in finding effective strategies for playin repeated games.

• Computational discovery.In the strategy formation work, FMEC researchers have investigated howcomputations may discover effective strategies. More generally, FMECresearchers have explored related learning methods for computationaldiscovery in such areas as data mining5 and investment policies.6

5 A Brief Guide to the Volume

With these remarks serving as a map, we may make short work of character-izing the twenty papers of this volume. The result will guide the reader. Thepapers are divided into four parts of the volume.

Part I. “Representation: Objects, Processes & Policies” contains seven pa-pers:

• Alan Abrahams, David Eyers, and Jean Bacon, “Practical Contract Stor-age, Checking, and Enforcement for Business Process Automation,” pages33–77.

This paper describes an extensive prototype implementation, in Java and arelational database, of a logic-based language for conducting commerce (Kim-brough’s FLBC). In terms of our FMEC framework, the paper focuses on aprocedural implementation of a logic formalism. It addresses the principalthemes of representation and inference in electronic commerce, and it hasmuch to say on the topics of electronic data interchange, electronic contract-ing, speech acts, and special logics.

5 E.g., [PT02].6 E.g., [Wu97].


• Aldo de Moor and Hans Weigand, “Legitimacy Checking in Communica-tive Workflow Design,” pages 79–99.

This paper introduces what the authors call an extended workflow loop. Usingthis idea as the basic unit of analysis, they introduce the concept of workflowloop norms, which are grounded in internal control theory. The paper developthis and related ideas, and demonstrates their use with examples. In termsof our FMEC framework, the paper focuses on graphs for its formalism.The paper addresses the principal themes of representation and inferencein electronic commerce, and it has much to say on the topic of system andprocess modelling.

We have already discussed the three chapters on the CANDID system:

• Ronald M. Lee, “CANDID Specification of Commercial and FinancialContracts: A Formal Semantics Approach to Knowledge Representation,Part I: Syntax & Formal Semantics of CANDID,” pages 101–143.

• Ronald M. Lee, “CANDID Specification of Commercial and FinancialContracts: A Formal Semantics Approach to Knowledge Representation,Part II: Formal Description of Economics Actors and Objects,” pages145–158.

• Ronald M. Lee, “CANDID Specification of Commercial and FinancialContracts: A Formal Semantics Approach to Knowledge Representation,Part III: CANDID Specification of Financial Concepts,” pages 159–176.

We warn the reader that these chapters are dense with notation. The under-lying ideas, however, are significant and merit the effort to take them in.

• Ronald M. Lee, “Performatives, Performatives Everywhere but Not aDrop of Ink,” pages 177–200.

This fourth paper by Lee, like the previous three and like the next paperby Kimbrough, is from the FMEC archives. Written in the mid-1990s, it hasnever been published, although it has circulated widely and influenced FMECwork.

The paper observes that the feasibility of open, flexible electronic com-merce relies heavily on the effective management of documentary procedures,i.e., the sequence by which (structured) business documents are exchangedamong contracting parties. These communications are performative (versusinformative) in that the act of communicating itself is a social action that al-ters the contractual, legal, or ownership relationship among the parties. Thepaper goes on to discuss the problems of supporting performative communi-cations and how they might be handled in principle. In terms of our FMECframework, the paper focuses on logic for its formalism. The paper addressesthe principal themes of representation and inference in electronic commerce,and it has much to say on the topic of speech acts (speech act theory wasdeveloped in part as a response to the recognition that utterances may beperformative), electronic data interchange, and electronic contracting.


• Steven O. Kimbrough, “EDI, XML, and the Transparency Problem inElectronic Commerce,” pages 201–227.

This paper, written in the mid-1990s and presented at a conference, attemptsto put to rest a confusion still present in some quarters. Standard EDI pro-tocols (including the X12 and UN/EDIFACT series) have repeatedly beencriticized for poor design, incoherent or absent semantics, and much else.XML has been touted by some as a proper remedy. The paper argues thatthis is a confusion. While there are many positive aspects of XML, the claimthat its tagging system allows documents to be semantically “self-describing”is misleading and overblown. XML may well be useful as a part of the solutionto the problem of making documents and messages semantically transparent,but its role is at best marginal for this problem. The paper goes on to pro-vide an account of what a proper solution would look like. In terms of ourFMEC framework, the paper focuses on logic for its formalism. The paperaddresses the principal themes of representation and inference in electroniccommerce, and it has much to say on the topics of speech acts, electronicdata interchange, and electronic contracting.

Part II. “Applications” has two papers:

• Vera Kartseva and Yao-Hua Tan, “Designing Control Mechanisms forValue Exchanges in Network Organisations,” pages 231–246.

This paper proposes a model for monitoring contract compliance, based inpart on concepts from deontic logic. The result is a design tool for mod-elling violations of obligations, which can be used in contract drafting andcontingency planning for inter-organisational collaboration in network organ-isations. In terms of our FMEC framework, the paper focuses on logic andgraphs (of organizational procedures) for its formalism. The paper addressesthe central topic of strategy formation, has as a key theme representationin electronic commerce, and offers much on the topic of system and processmodelling.

• Max Boisot, Ian MacMillan, Kyeong Seok Han, Casey Tan, and Si HyungEun, “Sim-I-Space: An Agent-Based Modelling Approach,” pages 247–294.

This paper describes Sim-I-Space, an agent-based model that operationaliseskey features of a conceptual framework: the Information-Space (I-Space).The I-Space relates the speed and extent of information flows between agentsto how far their messages have been structured through acts of codificationand abstraction. The more structured a message, the faster and more exten-sively it diffuses to other agents—intentionally or not. This concept is usedto discover and analyze strategic options for businesses, contingent upon the


diffusion of knowledge. In terms of our FMEC framework, the paper focuseson procedures for its formalism. The paper addresses the central topic ofstrategy formation, and has as a key theme representation in electronic com-merce.

Part III. “Communication” contains three papers:

• Steven O. Kimbrough and Yinghui (Catherine) Yang, “On RepresentingSpecial Languages with FLBC: Message Markers and Reference Fixingin SeaSpeak,” pages 297–324.

SeaSpeak is “English for maritime communications.” It is a restricted, special-ly-designed dialect of English used in merchant shipping and accepted as aninternational standard. This paper discusses, in the context of SeaSpeak, twokey problems in the formalization of any such restricted, specially-designedlanguage, viz., representing the illocutionary force structure of the messages,and formalization of such reference-fixing devices from ordinary language aspointing and use of demonstratives. In terms of our FMEC framework, thepaper focuses on logic for its formalism. The paper addresses the principalthemes of representation and inference in electronic commerce, and it hasmuch to say on the topic of speech acts.

• Andrew J.I. Jones and Steven O. Kimbrough, “A Note on ModellingSpeech Acts as Signalling Conventions,” pages 325–342.

This paper presents a fully formal integration of Jones’s logical theory ofspeech acts as signalling conventions with Kimbrough’s Formal Language forBusiness Communication (FLBC). The paper distinguishes between ‘inten-tionist’ accounts of speech acts and ‘conventionist’ accounts. In contradis-tinction to essentially all work in agent communication languages, Jones’stheory of speech is thoroughly conventionist. The paper argues that this is astrong advantage for the theory and demonstrates that Kimbrough’s FLBCfits comfortably and naturally with Jones’s theory of speech acts. In termsof our FMEC framework, the paper focuses on logic for its formalism. Thepaper addresses the principal themes of representation and inference in elec-tronic commerce, and it has much to say on the topics of speech acts, speciallogics, and electronic data interchange.

• Scott A. Moore, “Dynamic Conversation Structures: An Extended Ex-ample,” pages 343–360.

The subject of this paper is the important one of modelling and design ofconversations between communicating agents. The paper provides a detailedlook at a moderately complex conversation as represented by a finite state ma-chine, a representation used by an established agent communication system.Various representational methods are compared and discussed. The paper


concludes with a demonstration of how a multi-agent conversation policy canbe used to control the flow of messages, contrasts this with how messages arehandled via an inference-based process, and shows how the inference-basedprocessing can be integrated with the policy-based handling in order to dealwith exceptions to the policy. In terms of our FMEC framework, the paperfocuses on graphs for its formalism. The paper addresses the principal themesof representation and inference in electronic commerce, and it has much tosay on the topic of electronic data interchange.

Part IV. “Agents and Strategic Interactions” has eight papers:

• Scott A. Moore and Kurt Demaagd, “Investigating the Value of Informa-tion and Computational Capabilities by Applying Genetic Programmingto Supply Chain Management,” pages 363–391.

This paper presents the design of an innovative system for simulating agentsin supply chains. The agents undertake computational search for effectivestrategies using genetic programming. In terms of our FMEC framework, thepaper focuses on procedures for its formalism. The paper addresses the prin-cipal theme of learning in electronic commerce, and it has much to say on thetopics of electronic data interchange, strategy formation, and computationaldiscovery.

• Olga Streltchenko, Yelena Yesha, and Timothy Finin, “Multi-Agent Sim-ulation of Financial Markets,” pages 393–419.

This paper discusses the principal reasons for, and prospective opportuni-ties of, simulating financial markets using an architecture based on artificialagents. The paper then discusses in detail the design and architecture of asimulator for financial markets. In terms of our FMEC framework, the paperfocuses on procedures (principally, reinforcement learning) for its formalism.The paper addresses the principal theme of representation in electronic com-merce, and it has much to say on the topic of strategy formation.

• Alex K. Chavez, “Adaptive Agents in Coalition Formation Games,” pages421–443.

Coalition formation games form an important subclass of mixed-motive stra-tegic situations, in which players must negotiate competitively to secure con-tracts. This paper compares the performance of two learning mechanisms,reinforcement learning and counterfactual reasoning, for modeling play incoalition formation games. In terms of our FMEC framework, the paper fo-cuses on procedures (principally, reinforcement learning) for its formalism.The paper addresses the principal theme of representation in electronic com-merce, and it has much to say on the topic of strategy formation.


• Jim R. Oliver, “On Learning Negotiation Strategies by Artificial AdaptiveAgents in Environments of Incomplete Information,” pages 445–461.

This paper examines automated negotiation by artificial adaptive agents,which holds great promise for electronic commerce. Difficult practical is-sues remain unresolved, however. Published studies of learning of negotiationstrategies by agents have been based on artificial environments that includecomplete payoff information for both sides of the bargaining table. This isnot realistic in applied contexts. This paper considers the case of a seller whoknows its own preferences over negotiation outcomes but who has only lim-ited information about the private values of each customer. In terms of ourFMEC framework, the paper focuses on procedures (principally, genetic al-gorithms) for its formalism. The paper addresses the central topic of strategyformation, particularly in the context of negotiation.

• Steven O. Kimbrough, Ming Lu, and Ann Kuo, “A Note on StrategicLearning in Policy Space,” pages 463–475.

This paper introduces learning in policy space, in distinction to the usuallearning in state space, for agents in games. Instead of, as in most studies,the agents learning to associate plays with the recent history of play, agentshere learn which policies to play for a period of time, based on how well theyperform compared to other policies. The paper examines play in a number ofrepeated 2×2 games and finds that policy-space learning agents are generallymore effective than state-space learning agents in extracting wealth from thegame. In terms of our FMEC framework, the paper focuses on procedures (re-inforcement learning in several senses) for its formalism. The paper addressesthe central topic of strategy formation.

• Steven O. Kimbrough, Ming Lu, and Frederic Murphy, “Learning andTacit Collusion by Artificial Agents in Cournot Duopoly Games,” pages477–492.

This paper explores learning by artificial agents in repeated play of Cournotduopoly games. The agents’ employ policy-space learning regimes. The re-sulting behavior is markedly different from behavior predicted by classicaleconomics for the single-shot (unrepeated) Cournot duopoly game. In re-peated play under this learning regime, agents are able to arrive at a tacitform of collusion and set production levels near to those for a monopolist. Thepaper notes that Cournot duopoly games are reasonable approximations formany real-world arrangements, including hourly spot markets for electricity.In terms of our FMEC framework, the paper focuses on procedures (rein-forcement learning in several senses) for its formalism. The paper addressesthe central topic of strategy formation.


• Fang Zhong, “A Note on Working Memory in Agent Learning,” pages493–507.

The existing literature reports mixed findings on the effects of the amountof working memory on the effectiveness of agents in strategic contexts. Inthis note, Zhong describes an intelligent agent system in which three agents,one buyer and two bidders, play an Exchange game repeatedly. The buyeragent decides whether to list a request for proposal, while the bidders bidfor it independently. The paper finds that the relationship between workingmemory and the effectiveness of the agents has an inverted U shape, i.e., thereseems to be an optimal memory size. When agents with different memorysizes are mixed together, agents with the same amount of working memorygenerate the most efficient outcome in terms of total payoffs. In terms of ourFMEC framework, the paper focuses on procedures (reinforcement learning)for its formalism. The paper addresses the central topic of strategy formation.

• Sofia Chajadine, Daniel Mack, and Aaron Jeffrey Slan, “Investigationsof Granularity and Payoffs in 2×2 Games under Replicator Dynamics,”pages 509–527.

This paper describes an investigation of several 2×2 games in iterated form.Players play the games repeatedly and are limited to mixed strategies, withparticular actions chosen probabilistically. The games investigated includePrisoner’s Dilemma, Chicken, and Stag Hunt in various forms. The rewardstructure and the granularity of the games—number of games played pergeneration in the replicator dynamics—are the main factors investigated,with results that contravene existing studies that neglect these factors. Interms of our FMEC framework, the paper focuses on procedures (replicatordynamics) for its formalism. The paper addresses the central topic of strategyformation.

6 Upwards and Onwards

This completes our survey of FMEC research prior to and including thisvolume. What does or should the future hold? In what directions is the com-munity likely to go?

Engaging more directly with practice has been a much-discussed goal ofthe group. One considered view is that “next generation enterprise comput-ing” and agent-mediated electronic commerce, two important concepts underwider development, could benefit from achievements of FMEC research. Bothconcepts are by nature incremental (although they are not advertised thatway!). This facilitates a trial-and-feedback arrangement between ideas orig-inated in the FMEC community and the greater world of practice and use(aka: the ‘real’ world). Proxy bidding, in which artificial agents participate in


auctions while closely supervised by their human masters, is already in useand may well be a good model for deployment of other ideas.

Stepping back and taking perspective, the themes and topics addressed bythe FMEC community are important, are interesting, and afford nearly un-limited scope for further investigation and development. Moreover, the (‘non-standard’) modelling formalisms in use—logic, graphs, and procedures—havebeen productive and show no signs of exhaustion. Clearly, ‘broader anddeeper’ is a fine option. There is ample reason to continue on the path thatgot us here. That said, there is every reason to think that new ideas andnew directions will also be found and welcomed. What might they be? Wedo not presume to say. Instead, we close this essay with a speculative idea,which has been discussed at times within the FMEC community. We con-clude, then, in the spirit of asking a question—Is this a good idea?—ratherthan of predicting, let alone mandating, new developments.


Embodied Research

By design, open source software development resembles scientific research incertain ways. Both are open in the sense of being public and in the senseof inviting participation by anyone having a genuine contribution to make.Both are conducted by loosely organized, modestly hierarchical communitiesof volunteers. Both produce public goods, which may be exploited by anyone,including non-contributors. Both command general approbation in virtue ofthe open, public, and objective processes that underlie them, including anopen market for testing and validation. Both motivate and reward their par-ticipants largely by recognition, by the satisfaction due to making an impact,by access to information and other contributors “on the leading edge”, andby whatever immediate value the partcipants get from the resulting workproducts.

Scientific research and open source development differ crucially in thatone is research and the other is development. Roughly, research aims at pro-ducing knowledge or know-how. Development aims at producing productsthat are useful and used, products in which knowledge is embodied (to bor-row a term from patenting). Again roughly, the work product of research issymbolic and representational—axioms, models, equations, texts, theorems,algorithms, and so forth. The work product of development is tangible andembodied, locatable in space as well as time. Software is of course a border-line case. Even so, we may think of ‘research software’ as embodying ideasand demonstrating their feasibility. Production or ‘commercial grade’ soft-ware is more unproblematically an embodiment of its originating, abstractideas (whether or not produced by research).

Open source development projects are normally not driven by scientificresearch. They are ascientific. Their usual purpose is to produce a usefulproduct of some sort (Web server, text editor, browser, etc.), unmotivatedby any scientific or research-oriented considerations. The question we wish toraise is:

• Under what conditions would it be attractive and sensible to undertakeopen-source-like development (of software or of other forms of content)for the sake of furthering scientific (and possibly purely practical) ends?

We shall call such a venture an embodied research programme; it aims atproducing both scientific advances and useful, production-grade products,such as software and courseware. The concept itself raises any number ofnew questions. We will briefly address a few of them here.

• What sorts of research projects or topics might be suitable for embodiedresearch?

Properties of promising embodied research projects involving software (orcourseware) development would seem to include the following:


1. The envisioned software is not otherwise available or likely to be suppliedby the market.

2. The envisioned software is sufficiently simple that it can be created withacademic-level resources and capabilities. This suggests ‘lightweight’ ap-plications for lower-end users.

3. The envisioned software is demonstrably valuable to a significant clientcommunity, which is unable to afford commercial purchase of the ca-pability but which is ready and able to participate in the research anddevelopment efforts.

4. The envisioned software can be produced in individually useful incre-ments.

5. The envisioned software is useful for testing interesting research concepts,or for answering research questions.

6. The envisioned software is useful for demonstrating interesting researchconcepts and results, and for communicating ideas to interested parties,including funding organizations and potential clients.

7. The associated research issues are not exhaustible in the near term. Theresearch topic must afford depth, challenge, and longevity to the researchprogramme. It must also be inherently interesting from a research per-spective.

8. The embodied research project must afford partial, limited contributionsby the participants. Specialized contributions should be welcome andlegitimately appropriate; the project is decomposable, both in researchand in development.

• Are there any plausible examples of, or candidates for, such topics?

Plausible examples include:

1. FMEC: formal modeling for electronic commerce.Embodied agent communication languages, e.g., via ebXML. This presentsan apt challenge for theoretical analysis, and for connection to automated(presumably logical) reasoning. Software affords a demonstration testbedand could be used by SMEs (small and medium-sized entities) and firmsin developing countries.

2. Information retrieval, mining, and management for communities of mu-seums, hospitals, local governments, and other non-profit organizations.

3. Optimization software for researchers and practitioners (and for educa-tors).An excellent start has been achieved by COIN (www.coin-or.org), whichis perhaps the closest existing embodiment to the embodied researchconcept we are attempting to vet here.

4. Agent-based software for research and teaching purposes.An intriguing, although nascent, example is www.agentbasedis.org (Asso-ciation for Information Systems, Special Interest Group on Agent-Based


Information Systems). Note as well the Swarm Development Group atwww.swarm.org.VATSIM (www.vatsim.net) offers another, also successful, model. Fromtheir “About” page:

The Virtual Air Traffic Simulation Network, known as VATSIM.netor “VATSIM” was created in 2001 by a group of individuals whocame together with a goal of creating an organization which trulyserved the needs of the flight simulation and online air traffic con-trol community. With an eye towards more than just providing anetwork of computers for users to log into, VATSIM is an onlinecommunity where people can learn and, at the same time, enjoythe pastimes of flight simulation and air traffic control simulationall while making new friends from all over the world.

There now exists a vibrant community organized around VATSIM, as wellas remarkably complex and robust software supporting these activities.

• What incentives would or could scientific (normally academic) researchershave to contribute to an embodied research program?

Possibilities:

1. Recognition, impact2. Access to leading ideas and people; stimulus for research ideas3. Prospect for joint proposals for research funding4. Expectation of being able to use the developed software for teaching,

research, or consulting5. Special interest in furthering the subject matter, e.g., e-business for SMEs

(small and medium-sized entities) and developing countries6. Providing students with opportunities to contribute in ways that will

further their careers.7. Interest in the open source process itself8. As a vehicle for furthering and embodying existing ideas and expertise9. Exposure, publicity, networking

10. Useful feedback and testing of ideas

• How would one organize and initiate such a venture?

This is good question. It should be answered in more detail once theplausibility case is established. But roughly: (1) organize on the model of ajournal: editorial board of leading contributors, find contributing clients; (2)carefully initialize to guarantee some immediate successes (e.g., produce abody of work and make it the initial contribution to the project); (3) system-atically think through mechanisms for rewarding and incenting participation.

Regarding point (3), at least in some computer science departments soft-ware contributions can be ‘counted as’ valid forms of publication. Perhaps intime this convention could be strengthened and extended in scope. Also, theleadership of an embodied research project (e.g., the editorial board) coulddo much to arrange for opportunities for refereed publication.


• Could you be a bit more specific on what the next steps are?

Yes, but this is best left open to a general discussion. May it continue.

7 Acknowledgements

We wish to thank Ronald M. Lee, Robin Lougee-Heimer, Scott A. Moore,Marek Sergot, and Paul Weinberg for productive conversations contributingto and exploring the ideas here recorded. Of course, we insist on completecredit for everything here that is in error, misguided, or simply stupid.

A FMEC Bibliographic History

The birth of the FMEC community may be dated to the Logic Modellingminitrack at the 20th Hawaii International Conference on System Sciences(HICSS), held in January 1987, and organized that year by Ronald M. Leeand Steven O. Kimbrough. At HICSS, the annual Logic Modelling sessions,and later the FMEC minitrack itself, were supported throughout by RalphH. Spague, Jr. We are pleased to again acknowledge his contributions, forwhich we are most sincerely grateful.

Special, independent FMEC workshops have been held at:

• EURIDIS (Erasmus University Research Institute for Decision and Infor-mation Systems), Erasmus University, Rotterdam, The Netherlands, in1999

• Drexel Univeristy and the University of Pennsylvania, Philadelphia, USA,in 2000

• The University of Oslo, Oslo, Norway, in 2001• #Lodz, Poland, in 2002

Papers from the FMEC community may be found in the HICSS Proceedings,beginning in 1987. The Logic Modelling and FMEC minitracks have concen-trations of the papers, but other minitracks hold them as well. To date, 21Ph.D. theses have been produced in the FMEC community. They are listedin Appendix A.1, below.7 The FMEC community has so far published 10special issues of journals, comprising 59 refereed articles. These are listed inAppendix A.2, below. We are most grateful for the support of the editors ofthe host journals:

• Melvin F. Shakun, Group Decision and Negotiation• Andrew Whinston, Decision Support Systems• Vladimir Zwass, Journal of Management Information Systems and In-

ternational Journal of Electronic Commerce7 We apologize if we have missed any.


The open literature contains a large number of papers arising out of theFMEC community. The comprehensive References section of this volume isa good source for locating these papers. The home pages and curricula vitaeof the FMEC authors may be consulted for additional papers.

Besides HICSS, members of the FMEC community have been, and con-tinue to be, active in a number of conferences and workshops, notably: ICAIL(International Conference on Artificial Intelligence and Law), DEON (Inter-national Workshop on Deontic Logic in Computer Science), the Bled Elec-tronic Commerce Conference, and LAP (Language-Action Perspective onCommunication Modelling, International Working Conference).

A.1 FMEC Ph.D. Theses

1. CANDID: A Logical Calculus for Describing Financial Contracts by Ron-ald M. Lee, University of Pennsylvania, USA, 1980, [Lee80].

2. A Logic Model for Model Management: An Embedded Languages Ap-proach by Hemant K. Bhargava, University of Pennsylvania, USA, 1990,[Bha90].

3. Timed Coloured Petri Nets and their Application to Logistics by W.M.P.van der Aalst, Eindhoven Technical University, The Netherlands, 1992,[Aal92].

4. Schematic Evaluation of Internal Accounting Control Systems by Kuo-Tay Chen, University of Texas at Austin, USA, 1992, [Che92].

5. Contracting on a Performative Network: Using Information Technologyas a Legal Intermediary by Sandra D. Dewitz, University of Texas atAustin, USA, 1992, [Dew92].

6. A Formal Model for Maintaining Consistency of Evolving BureaucraticPolicies: A Logical and Abductive Approach by Kay Liang Ong, Univer-sity of Texas at Austin, USA, 1992, [Ong92]

7. Probabilistic and Defeasible Reasoning Using Extended Path Analysis byStephen F. Roehrig, University of Pennsylvania, USA, 1992,[Roe92].

8. A Formal Representation of Normative Systems: A Defeasible DeonticReasoning Approach by Young Ryu, University of Texas at Austin, USA,1992, [Ryu92].

9. Saying and Doing: Uses of Formal Languages in the Conduct of Businessby Scott A. Moore, University of Pennsylvania, USA, 1993, [Moo93].

10. Theory and Applications of Argumentation Support Systems by Hua Hua,University of Pennsylvania, USA, 1995, [Hua95].

11. Formal Theories of Rights by Henning Herrestad, University of Oslo,Norway, 1996, [Her96].

12. On Artificial Agents for Negotiation in Electronic Commerce by Jim R.Oliver, University of Pennsylvania, USA, 1996, [Oli96b].

13. The Structure of Business Communication: Theory, Model and Applica-tion by Victor Emil van Reijswoud, Delft University, The Netherlands,1996, [vR96].


14. Designing Trustworthy Trade Procedures for Open Electronic Commerceby Roger Bons, Erasmus University, The Netherlands, 1997, [Bon97].

15. Normative Structures in Natural and Artificial Systems by Cristen Krogh,University of Oslo, Norway, 1997, [Kro97].

16. Managing Complex, Open, Web-Deployable Trade Objects by Hung Wing,University of Queensland, Australia, 1997, [Win97].

17. Using Genetic Algorithms to Determine Near-Optimal Pricing, Invest-ment and Operating Strategies in the Electric Power Industry by Dongjun(D.J.) Wu, University of Pennsylvania, USA, 1997, [Wu97]

18. Logic-Based Tools for the Analysis and Representation of Legal Contractsby Aspassia Daskalopulu, Imperial College, University of London, UK,1999, [Das99].

19. Information Sharing among Ideal Agents by Alessio R. Lomuscio, Schoolof Computer Science, University of Birmingham, UK, 1999,[Lom99].

20. Developing and Executing Electronic Commerce Applications with Oc-currences by Alan S. Abrahams, University of Cambridge, UK, 2002,[Abr02].

21. Strategy as Valuation by Christina Fang, University of Pennsylvania,Philadelphia, PA, USA, [Fan03].

A.2 FMEC Special Issues Bibliography

March 1988 Decision Support Systems, volume 4, number 1, 1988.

1. “Logic Modeling: A Tool for Management Science” by Steven O. Kim-brough and Ronald M. Lee [KL88].

2. “Requirements Analysis Assisted by Logic modelling” by Peter C. Scott[Sco88].

3. “A Logic Model for Electronic Contracting” by Ronald M. Lee [Lee88b].4. “A Quantitative Approach to Logical Inference” by J.N. Hooker

[Hoo88].5. “Spatial Imbedding for Linear and for Logic Structures” by Robert G.

Jeroslow [Jer88].6. “Logic modelling with Partially Ordered Preferences” by George R. Wid-

meyer [Wid88].7. “Defeasible Reasoning and Decision Support Systems” by Donald Nute

[Nut88].8. “Why Nonmonotonic Logic?” by Steven O. Kimbrough and Fred Adams

[KA88].9. “A Conditional Logic for Defeasible Beliefs” by Marvin Belzer and Barry

Loewer [BL88].


May 1990 Decision Support Systems, volume 6, number 2, 1990.

10. “The Sensitivity Properties of Hierarchical Logic-Based Models” by Rob-ert W. Blanning [Bla90].

11. “On Representation Schemes for Promising Electronically” by Steven O.Kimbrough [Kim90].

12. “A Logic modelling Language for Automated Model Construction” byRamayya Krishnan [Kri90].

13. “Controlling Expert System Recommendations with Defeasible Logic” byDonald Nute, Robert I. Mann, and Betty F. Brewer [NMB90].

14. “Meta-Interpreters for Rule-Based Inference under Uncertainty” by Shi-mon Schocken and Tim Finin [SF90].

15. “Reasoning with Preferences and Values” by George R. Widmeyer[Wid90].

February 1994 Decision Support Systems, volume 11, number 2, 1994.

16. “EVID: A System for Interactive Defeasible Reasoning” by Robert L.Causey [Cau94].

17. “Defeasible Reasoning in Law” by Sandra D. Dewitz, Young Ryu, andRonald M. Lee [DRL94].

18. “Ordered Logic: Defeasible Reasoning for Multiple Agents” by P. Geerts,D. Vermeir, and D. Nute [GVN94].

19. “Bayesian Logic” by K. A. Andersen and J. N. Hooker[AH94].

20. “A Relational Algebra for Propositional Logic” by Robert W. Blanning[Bla94].

21. “Text Editing and Beyond: A Study in Logic modelling” by MichaelBieber and Thomas Isakowitz [BI94].

Summer 1997 International Journal of Electronic Commerce, volume 1,number 4.

22. “Formal Aspects of Electronic Commerce: Research Issues and Chal-lenges” by Steven O. Kimbrough and Ronald M. Lee[KL97].

23. “On Designing a Language for Electronic Commerce” by Michael A. Cov-ington [Cov97].

24. “Artificial Agents Learn Policies for Multi-Issue Negotiation” by Jim R.Oliver [Oli97a].

25. “Designing a Market for Quantitative Knowledge” by Georg Geyer,Christoph Kuhn, and Beat Schmid [GKS97].

26. “Electronic Commerce in Decision Technologies: A Business Cycle Anal-ysis” by Hemant K. Bhargava, Ramayya Krishnan, and Rudolf Muller[BKM97].

27. “The Development of FEDI in Switzerland: A Life-Cycle Approach” byIvo Cathomen and Stefan Klein [CK97].


March 1998 Decision Support Systems, volume 22, number 3, 1998.

28. “Speech Acts, Electronic Commerce, and KQML” by Michael A. Coving-ton [Cov98].

29. “Categorizing Automated Messages” by Scott A. Moore [Moo98].30. “A Logic-Based modelling of Resource Consumption and Production” by

Young U. Ryu [Ryu98].31. “On Hypermedia-Based Argumentation Decision Support Systems” by

Gary H. Hua and Steven O. Kimbrough [HK98].32. “Defeasible Logic Graphs: I. Theory” by Donald Nute and Katrin Erk

[NE98].33. “Defeasible Logic Graphs: II. Implementation” by Donald Nute, Zachary

Hunter, and Christopher Henderson [NHH98].

Winter 1998–99 International Journal of Electronic Commerce, volume 3,number 2.

34. “Framework for Specifying, Building, and Operating Electronic Markets”by Markus A. Lindemann and Beat F. Schmid[LS99].

35. “Formal Language for Business Communication: Sketch of a Basic The-ory” by Steven O. Kimbrough [Kim99].

36. “Meta-Patterns for Electronic Commerce Transactions Based on the For-mal Langauge for Business Communication (FLBC)” by Hans Weigandand Willem-Jan van den Heuvel [Wv99].

37. “Specifying Deadlines with Continuous Time Using Deontic and Tempo-ral Logic” by Frank Dignum and Ruurd Kuiper [DK99].

38. “A Logical Model of Directed Obligations and Permissions to SupportElectronic Contracting” by Yao-Hua Tan and Walter Thoen[TT99].

39. “Distributed Electronic Trade Scenarios: Representation, Design, Proto-typing” by Ronald M. Lee [Lee99].

Fall 2000 International Journal of Electronic Commerce, vol. 5, no. 1.

40. “Artificial Agents for Discovering Business Strategies for Network Indus-tries” by D.J. Wu [Wu00].

41. “Pricing and Product Design: Intermediary Strategies in an ElectronicMarket” by Hemant K. Bhargava, Vidyanand Choudhary and RamayyaKrishnan [BCK00].

42. “A Formal Analysis of Auditing Principles for Electronic Trade Proce-dures” by Roger W.H. Bons, Frank Dignum, Ronald M. Lee, and Yao-HuaTan [BDLT00].

43. “On Lean Messaging with Unfolding and Unwrapping for Electronic Com-merce” by Steven O. Kimbrough and Yao-Hua Tan[KT00].


44. “KQML and FLBC: Contrasting Agent Communication Languages” byScott A. Moore [Moo00a].

July 2002 Decision Support Systems, volume 33, number 3, 2002.

45. “On the Concept of Trust” by Andrew J.I. Jones [Jon02].46. “Formal Aspects of a Generic Model of Trust for Electronic Commerce”

by Yao-Hua Tan and Walter Thoen [TT02].47. “Cross-Organizational Workflow Integration Using Contracts” by Hans

Weigand and Willem-Jan van den Heuvel[Wv02].

48. “Computational Aspects of the FLBC Framework” by Aspassia Daskalop-ulu and Marek Sergot [DS02].

49. “Automated Generation of Electronic Procedures: Procedure ConstraintGrammars” by Ronald M. Lee [Lee02].

50. “Knowledge Refinement Based on the Discovery of Unexpected Patternsin Data Mining” by Balaji Padmanabhan and Alexander Tuzhilin [PT02].

51. “Computers Play the Beer Game: Can Artificial Agents Manage SupplyChains?” by Steven O. Kimbrough, D.J. Wu, and Fang Zhong[KWZ02].

52. “Cooperation in Multi-Agent Bidding” by D.J. Wu and Yanjun Sun[WS02].

November 2002 Group Decision and Negotiation, vol. 11, no. 6, 2002.

53. “Cooperative Agent Systems: Artificial Agents Play the Ultimatum Game”by F. Zhong, Steven O. Kimbrough, and D.J. Wu [ZKW02].

54. “On Adaptive Emergence of Trust Behavior in the Game of Stag Hunt” byChristina Fang, Steven O. Kimbrough, Stefano Pace, Annapurna Valluri,and Zhiqiang Zheng [FKP+02].

55. “Evidence-Based Electronic Contract Performance Monitoring” by As-passia Daskalopulu, Theo Dimitrakos. and Tom Maibaum[DDM02].

56. “A Software Implementation of Kimbrough’s Disquotation Theory forRepresenting and Enforcing Electronic Commerce Contracts” by Alan S.Abrahams and Jean M. Bacon [AB02b].

January 2003 Group Decision and Negotiation, vol. 12, no. 1, 2003.

57. “B2B Negotiation Support: The Need for a Communication Perspective”by Hans Weigand, Mareike Schoop, Aldo de Moor, and Frank Dignum[WSdMD03].

58. “A Classification Scheme for Negotiation in Electronic Commerce” byAlessio R. Lomuscio, Michael Wooldridge, and Nicholas R. Jennings[LWJ03].


59. “The Effects of Personal and Group Level Factors on the Outcomes ofSimulated Auditor and Client Teams” by Gary Kleinman, Dan Palmon,and Picheng Lee [KPL03].

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Documents

Stev en O. Ki m br oug h & D . J. W u F ormal Mo d el ling for ...opim.wharton.upenn.edu/~sok/fmec/fmec-book-intro.pdfth anks, h ow ev er, go to four senior in div idu als w h o ha