Commonsense Aspects of Buying and Selling
Commonsense Aspects of Buying and Selling
<} } < C OM MONSENSE ASPEC TS OF BUYING AND SELLING VA R OL A KMAN Department of Computer Engineering and Information Science, Bilkent University, Bilkent, Ankara, Turkey M UR AT ER SAN Department of Computer Science, Brown University, Providence, Rhode Island, USA W e de scribe an e xpe rime ntal approach toward im ple m enting a comm onse nse ``microthe ory’ ’ for buying and se lling. O ur prototype syste m characte rize s how inte llige nt agents hold ite ms and mone y, how the y buy and se ll ite ms, and the way mone y and ite ms are transfe rre d. The ontology of the syste m include s mone y cash, che ck, cre dit card ., age nts pe ople , organizations ., item s m ovable , re al estate , se rvice ., barte r, and the notions of transfe r, loan, buying by installm ents, profit, and loss. Som e ye ars since , Made moiselle Z Â e lie , a singe r of the The Â Ã atre Lyrique at Paris, m ade a profe ssional tour round the world, and gave a conce rt in the Society Islands. In e xchange for an air from Norma and a few othe r songs, she was to re ce ive a third part of the W e thank David Dave nport Bilke nt Unive rsity. for his pe rce ptive re marks on a pre vious version of the manuscri pt. Akman’ s re se arch is supporte d in part by a grant from the NA TO Scie nce for Stability Program me III. Sun W orkstation is a re giste re d trade m ark of Sun Microsyste ms, Inc. KE E Knowle dge Engine ering Environme nt . is a trade m ark of Inte lliCorp, Inc. Addre ss corre sponde nce to V arol Akman, De partme nt of Com pute r Engine ering and Informatio n Scie nce , Bilke nt Unive rsity, Bilke nt, Ankara 06533, Turke y. E-mail: akman@ bilke nt.e du.tr. Cybernetics and Systems: An International Journal, 27 :32 7 ] 352, 19 96 Copyright Q 19 96 Taylor & Francis 019 6-97 22 ¤9 6 $1 2.0 0 + .0 0 327 328 V. AKMAN AND M. ERSAN rece ipts. W he n counted, he r share was found to consist of thre e pigs, twe nty-thre e turkeys, forty-four chicke ns, five thousand cocoa-nuts, be side s conside rable quantitie s of bananas, le m ons and orange s. A t the Halle in Paris, as the prima donna remarks in he r lively le tte r, printed by M. W olowski, this am ount of live stock and vege table s might have brought four thousand francs, which would have be e n good remune ration for five songs. In the Society Islands, howe ve r, pie ce s of mone y we re ve ry scarce ; and as Made m oiselle could not consume any conside rable portion of the rece ipts he rse lf, it be cam e ne ce ssary in the me antime to fe e d the pigs and poultry with the fruit. W he reas in mode rn civilize d socie ty inconvenie nce s of the above sort Je vons, 1973, p. 25 . are not really felt,1 the conve ntional wisdoms of buying and se lling re main to be fully articulated. H aving intuitively pe rceived the function of mone y, we still ne e d to orde r our pe rce ptions pre cise ly into a logical frame work. It should be rem arked that Schank’s conce ptual de pe nde ncy the ory Schank & Abe lson, 1977 . and late r work of his Schank, 1980 . concern repre senting and drawing infere nce s about the transfer of abstract relationships such as possession, owne rship, and control } relationships of obvious concern to buying and se lling. O the r re lated works in this regard include application systems such as ATR ANS w Lytine n, 1986 ., which processe s mone y transfe r me ssage s, and O pE d Alvarado, 1990, 1992 ., which unde rstands argume nts in e ditorial texts conce rning trade re lationships, e conomic protectionism, and so on. In the are as of financial e xpe rt system s and e xpe rt systems in busine ss Barrett & B e e re , 1988 ., the re are similar applications e .g., Lassez e t al., 1987 ., which ne e d de taile d repre sentations of com monse nse knowle dge of buying and se lling. De spite all the se groundbreaking, original studie s, we are not aware of studie s of e liciting the commonse nse knowle dge ne cessary to solve 1 A colle ague re marke d that the proble m of Made moise lle Z Â e lie is not unlike the proble m of having an inte rnal curre ncy only trade d with a country . and an e xte rnal curre ncy trade d against othe r curre ncie s .. He the n adde d that this is the case in China and would be a good exam ple . COMMONSENSE ASPECTS OF BUYING AND SELLING 329 the simple daily. problem s of e conomic transactions such as buying and se lling. It is true that a good place to look for information about the kind of knowle dge involve d in simple micro.e conom ics is an introductory textbook on the subje ct e .g., Froye n & Gree r, 1989 .. Supe rficially, such texts appe ar to summ arize the kinds of knowle dge require d to a sufficie nt de gree , and it may be thought that formalizing that knowle dge would be rathe r e asy. A close e xamination, howe ve r, re ve als that this is but an illusion. In all be ginning e conomics books the re is an implicit assumption on the authors’ part that the re ade r has an e xisting commonsense frame work. This ``pre-e conomics’’ knowle dge forms the background with which the ne wly de scribed pie ce s of knowle dge can be unde rstood. w Similar rem arks have be e n m ade in the conte xt of a pione e ring study by de Klee r on naive physical re asoning de Klee r, 1975 ..x W e hope to contribute to such a study he re and prese nt a commonse nse microthe ory 2 for buying and selling and its imple me ntation. The comm onse nse knowle dge of e ve nts involve d in this activity is form alized. O ur the ory de scribes how inte llige nt age nts hold ite ms and mone y. W he n an age nt de cide s to buy or se ll an ite m, the the ory ge ne rate s the re sulting e vents, such as the transfe r of an ite m from a se lle r to a buye r and the corresponding transfer of mone y from a buyer to a selle r. The system has some portion of the naive knowle dge that an age nt living in a W e ste rn country in the 1990s should have in orde r to unde rstand the issue s involve d in a buying and se lling proce ss. The ontology incorporate s mone y cash, che ck, credit card ., age nts pe ople or organizations ., ite ms m ovable , re al e state, se rvice ., shops, barter, and the notions of transfer, loan, buying by installme nts, profit, and loss. It should be noted, howe ve r, that we have not built an e xpe rt system that is making de cisions and assisting humans in busine ss proble ms, like those use d in credit e valuation, investme nt planning, or risk 2 The term m icroth eory is borrowe d from Cyc, whe re it is use d to re fe r to a spe cial class of conte xts Lenat & Guha, 1989 . . Diffe re nt microthe orie s m ake diffe re nt assumptions and diffe re nt sim plifications . about the world. Conte xts provide a me chanism for re cording and re asoning with the se assum ptions. For any give n topic, such as buying and se lling, the re m ay be diffe re nt m icrothe orie s of that topic, at varying leve ls of de tail and gene rality. 330 V. AKMAN AND M. ERSAN assessme nt Barre tt & Be e re, 1988 .. The se are the tasks of an ``e xpe rt’’ on a spe cific topic. W e are trying to formalize basic com monse nse issue s that e ve ry ``ordinary’’ individual is involve d in and has intuitions about. In the first ve rsion of this pape r E rsan e t al., 1993 ., the re we re se veral simplifying assumptions. E vents involving tim e such as inflation and inte rest we re not cove red. In the current formalization, the y are introduce d but still are not comple te ly cove red. Previously, it was assume d that the buying and se lling proce ss is pe rforme d only using mone y. The e xchange of ite ms without using mone y i.e ., barter . was not taken into conside ration. Now, the the ory comple te ly covers barter. It is possible to ge ne rate the e ve nts that take place in a barte ring situation. Ne w notions are also introduced into the system; for e xample , it handle s the borrowing of mone y and can compute the profit and loss of the se lle rs. Given an inflation rate , the system is able to de duce the numbe r and amount of installme nts, if the buying is being realized in installme nts. Also, the se lle r’s willingne ss to se ll ite ms is take n into conside ration. It is take n for grante d that e very age nt acce pts cash and che ck and that e very shop acce pts e very kind of credit card. Diffe rent currency units can be use d in buying and se lling. The e sse ntial motivation for this work come s form the Cyc proje ct Le nat & Guha, 1989 .. W e have e spe cially be e n influe nce d by Cyc-related work by Pratt and Pratt 1991 . on naive the ories of mone y. The se are microthe ories that de scribe the ways in which age nts store and transfer mone y. A particular microthe ory focuses on the docume nts that are use d to transfer mone y, the accounts that can store mone y, the spe cial case of cash, and various m one y transfer actions. Howe ver, the the ory doe s not cove r situations in which mone y is use d, such as buying an item. In that sense , our the ory cove rs all the se aspe cts and seve ral othe rs. W e we re mainly influe nced by the ide a of formalizing commonse nse notions and the way it is done in Cyc. Pratt and Pratt’s ove rvie w is rathe r parenthe tic after all it is only five page s long ., and as we have no acce ss to the more rece nt but classifie d . Cyc docum e nts, we cannot hope to e valuate the curre nt abilitie s of Cyc vis-a-vis our naive e coÁ nomics. Howe ver, we can probably hope that our prese nt system doe s incorporate many of the capabilitie s cite d in Pratt and Pratt 1991 .. W e must e mphasize that our aim was not to build a comme rcial product but to te st the feasibility of such a task. O the r factors that he lpe d formulate our frame work include Haye s’ pione e ring m e thod- COMMONSENSE ASPECTS OF BUYING AND SELLING 331 ological studies of naive physics Haye s, 1979, 1985 . and the ge ne ral advice of McCarthy 3 re garding basic re se arch in AI McCarthy, 1990 .. The imple me ntation of the the ory has be e n pe rforme d on a Sun workstation using KE E Knowle dge E ngine e ring E nvironme nt . KE E , 1993 .. Howe ve r, we do not want the m ain value of this pape r to be see n as an application of KE E software in mode ling the be havior of individuals in an e conom ic system that allows for many choice variable s and many e xoge nous influe nces. Although pote ntially this sort of mode ling could be useful in a num ber of real-world applications e .g., mode ling of financial markets, valuation of inve stme nt asse ts ., the main goal of our re search is to unde rstand the com monse nse e xpe ctations about buying and se lling. As a re sult, seve ral sim plifying assumptions have be e n made in the the ory, too many, as a matte r of fact, to le ave a potential re ade r with an uncomfortable fee ling about gaps and brittlene ss. U nfortunate ly, this se e m s to be a major proble m with rese arch in commonsense re asoning in ge ne ral. True , some } if not a majority } of the system rule s to be prese nte d in the se que l will see m ad hoc. The re is some difficulty in imagining the system scaling up. At this stage, we cannot re ally comfort the reade r with such proble ms in m ind.4 Le t us simply re iterate that we belie ve that what we are doing he re is e xpe rim e ntal computer scie nce , with no pre te nsions to be use d as the basis of a practical re asoning system or a natural language system. BUYING A ND SELLING M oney in Buying and Selling Mone y is a ke y instrume nt in buying and se lling. Age nts can hold mone y in diffe rent form s. The y can have cash, and today this is still the 3 McCarthy state s that 1990, p. 188 . ``w wx e ne e d good proble m domains } the AI analog of what Drosoph ila did for ge ne tics.’’ W e be lie ve that buying and se lling is a good proble m domain in this re gard. First, it is full of fundam ental que stions } we hope to tackle in the pre se nt pape r } som e of which and ope n proble m s and long-te rm re se arch issue s. Se cond, this is a domain in which to m ake e xpe rim ents that are re ally informative. To quote McCarthy again w 15, p. 188 x , ``w a x t pre se nt the failure s are m ore im portant than 1990, p. 188 . , the succe sse s, be cause the y ofte n te ll us that the inte lle ctual m echanisms we im agine d would inte lligently solve ce rtain proble ms are inade quate .’ ’ 4 Maybe it m ay he lp to note that a re ce nt Cyc ne wsle tter state s that ``w t x he entire te chnical approach . . . w upon which a proje ct such as Cyc is base d x is innovative and risky. Fortunate ly, ove r the past w eight x years the proje ct has progre sse d to the point whe re the `risk’ is now sm all.’ ’ 332 V. AKMAN AND M. ERSAN most common way. The y can have bank accounts and cre dit cards. The re are seve ral othe r ways. Howe ver, the se thre e are the most comm on one s and our the ory cove rs only the se . The thing all the ite ms use d as mone y have in common is the ir acce ptance in a particular historical context . in re turn for othe r goods and service s with the unde rstanding that othe rs would likewise acce pt the m. Cash can be used physically. In orde r to use the mone y in a bank account, che cks are used. Age nts can use as much mone y as the y have in the ir bank accounts. In the case of cre dit cards, agents have a card and a re late d account with a lim it. The y can spe nd an amount of mone y not e xce e ding this lim it. W he n the y spe nd som e mone y using a credit card, the y owe that mone y to the account and should pay it back later. E ach age nt in our system has an amount of mone y that he can spe nd in a buying and se lling proce ss. This amount is the sum of an age nt’ s whole mone y, e ithe r in cash, bank account, or cre dit. The value of an age nt’s be longings car, house , e tc.. and the am ount of the age nt’s spe ndable mone y total anothe r amount calle d the assets of an agent. This information about an age nt should be known by the system, be cause an age nt who wants to buy some thing must have e nough mone y to do so. If the item that the age nt wants to buy is real e state, the spe ndable mone y might not be e nough to buy it. B ut the age nt might have othe r re al e state and can sell the latter and use this mone y to buy the forme r. Items in Buying and Selling In e ve ry buying and se lling proce ss an item is involve d. In our the ory, e verything that can be bought and sold is conside red as an ite m. Actually, the re are thre e diffe rent kinds 5 of ite ms: movable, real e state , and se rvice . O ur the ory tre ats ge tting a se rvice such as a haircut or dry cle aning . as a buying and se lling proce ss; that is, an age nt simply buys a se rvice from anothe r age nt who sells this service . Ite ms are also classifie d as durables and nondurable s, transfe rable and nontransferable goods. Those that are durable have an e xpe cte d lifetime and an age 5 This se e ms quite arbitrary, and the re must be m ore and diffe re nt kinds of items. For exam ple , bonds and stock change owne rship, but the ir posse ssion doe s not esse ntially change be cause the y are still he ld centrally in a bank. In our pre lim inary the ory we did not tre at this issue in de tail be cause of the numbe r of technicalitie s involve d. COMMONSENSE ASPECTS OF BUYING AND SELLING 333 using which we can calculate the ir de preciation. W ith the latter classification, it is se e n that a se rvice can be thought of as a nondurable an d nontransfe rable good. E ach ite m in the system has an owne r. This owne r can be a shopke e pe r or an ordinary pe rson. Both of the m can se ll the ite ms that the y own. The re are diffe rent kinds of shops. Age nts have some commonsense knowle dge about whe re the ordinary ite ms of daily life are sold.6 For e xample , bread and ne wspape rs are sold at the corne r store.. The value s of the se ite ms are also within the commonsense knowle dge of age nts. If an agent has e nough mone y and knows whe re to buy the ite m, he can buy it. The owne rship of item s de pe nds on the kind of item s. If an item is movable , the owne r holds the ite m physically. If an ite m is real e state , the re are docume nts about the item and the pe rson who holds the se docume nts owns the ite m. If the item is a se rvice , a proce ss rece iving se rvice . is involve d and no one can hold this ite m physically. The ore tically, the re se e m s no re ason why ``shares’ ’ of goods could not be e asily incorporate d in our frame work. Although our system curre ntly doe s not support this, a reasonable approach would be to de fine y x, n . as 1 unit of a good that is itse lf an n th share in x, a share d good. Transfers in Buying and Selling O ne of the e sse ntial aspe cts of our the ory of buying and se lling is the ide a of a transfe r. The the ory conside rs buying and se lling as a mone y transfer and a corre sponding item transfe r, whe re the forme r stands for paying the value of the item and the latte r stands for changing the owne rship of the ite m. For all the se transfe rs to occur, som e pre conditions re garding the buyer and se lle r should hold. The buye r m ust have e nough mone y and know whe re the ite m is sold, and the se lle r should be willing to se ll that 6 The re is a proble m he re that doe s not go away whe n the individuals know the location of all the store s but not the price s at each store . Normally, individuals have to face a trade -off be twe e n acce pting the price of a particular se lle r or incurring furthe r se arch costs in the hope of finding a lowe r price or a be tte r brand, or a close substitute , e tc.. else whe re . U nfortunate ly, se arching is known to be a costly activity in ge ne ral. W e admit that it would make our syste m m uch more inte re sting, but we did not addre ss the ide a that agents are engage d in a se arching activity. 334 V. AKMAN AND M. ERSAN ite m. In our the ory we assume that all shopke e pe rs are willing to se ll the ite ms in the ir shops. In fact, shops e xist to sell ite ms. O n the othe r hand, an ordinary se lle r who is not a shopke e pe r should agree to se ll the ite m be fore the mone y and item transfe rs take place . As the system de fine s mone y in thre e diffe re nt type s cash, che ck, and cre dit card ., the transfe r of m one y is also cate gorize d into thre e differe nt classes. Cash transfe r is the most common one . O ne assumption of the system is that m one y transfe rs of le ss than some some fixe d amount are made in cash. No one with a right mind . would use che ck or credit cards to buy ne wspape rs or bre ad. W he n cash is use d in buying and se lling, the amount of m one y that an age nt owns directly incre ase s or de cre ase s according to this role selle r or buye r .. To use a che ck or a credit card, an age nt should have a bank or, say, a V isa account. If an age nt buys an item by writing a che ck, the balance of his bank account would de crease by the amount transfe rre d. O n the othe r hand, if a credit card is used, the n the am ount that the age nt owe s to the V isa account incre ases. The refore, the se accounts may have ne gative balance s. It should be ke pt in mind that an age nt who buys an ite m from anothe r age nt who is not a shopke e pe r cannot use his credit card but pays e ithe r in cash or by che ck. It is not usually possible to buy a house or your ne ighbor’ s car using your credit card. E ach m one y transfe r has an amount and change s the amount of the spe ndable m one y of the age nts. So buying an ite m de crease s the amount of spe ndable m one y of the buye r by the amount transfe rred. Anothe r im portant fact is that a mone y transfe r doe s not always occur with a corre sponding item transfer. In some cases an additional mone y transfer occurs whe n the se lle r give s change back to the buyer. The amount of the e xtra mone y transfe r can be calculate d by subtracting the value of the ite m from the amount of the mone y transfe r. This ``payback mone y transfer’ ’ occurs only whe n cash is use d in the mone y transfe r. The the ory allows the mone y transfers to be in any curre ncy unit; so an age nt who gives Dutch guilde rs can be paid back in U.S. dollars if he wants. The main ide a be hind an ite m transfe r is the change of the owne rship of an ite m. He re, we should reme mbe r that se rvice s are also conside red to be item s and are handled in a spe cial way. Afte r an ite m transfer occurs, the ne w owne r of the ite m is the buye r, unle ss the ite m is a se rvice . The way an item is transferre d de pe nds on the type of ite m. The transfe r of a movable item e .g., a ne wspape r . is pe rforme d by COMMONSENSE ASPECTS OF BUYING AND SELLING 335 ``giving’’ the item to the buye r. If the ite m is a service , the n the se lle r gives service to the buye r by cutting the buyer’ s hair, for e xample .. The transfer of real e state, on the othe r hand, is conside red as a transfe r of a docume nt of owne rship or authorization and affe cts the ne t asse ts of age nts. If an age nt buys re al e state, this results in an incre ase in the assets of the age nt, and the se lle r’ s amount of assets de creases by the amount of that re al e state. Schank and Abe lson 1977 . introduced and inve stigate d a universal knowle dge repre sentation system in which the y introduce d the te rm atran s, which stands for the transfer of an abstract re lationship such as possession, owne rship, or control. It is note d that Schank and Abelson’ s ge ne ral aim was also to m ode l comm on se nse 1977, p. 4 .: O ur focus will be upon the world of psychological and physical e ve nts occupying the m e ntal life of ordinary individuals. O ur knowle dge systems will e mbody what has be e n calle d `naive psychology’ w . . . x } the common sense though pe rhaps wrong. assumptions which pe ople make about the motives and be havior of the mse lve s and othe rs } and also a kind of `naive physics’, or primitive intuition, as is capture d in Conceptual De pe nde ncy CD . the ory. In our the ory both the transfe r of m one y and that of item s can be conside red as atrans. Howe ver, we belie ve that a commonsense microthe ory should be more fine -graine d than this approach. For e xample , in Schank and Abelson’ s pragmatic approach the transfe r of the owne rship of mone y must sim ply be conside re d as an atrans of mone y. Ye t, in our system we furthe r cate gorize this transfer of m one y into thre e differe nt classe s because the re are diffe rent rule s de aling with differe nt classe s. The same argum e nt holds for the transfe r of ite ms. The following sce nario is give n to e lucidate how the system pe rforms a buying and selling proce ss. E ach KE E figure represe nts a unit. E ach unit has a num ber of slots, and e ach slot has a ce rtain value of a ce rtain value class. The value s of a unit may be inhe rite d from anothe r unit indicate d as From Unit in the figures . according to the inhe ritance type indicated as Inhe ritance in the figure s .. John is an age nt in the system Figure 1a .. H e wants to buy a ne wspape r Figure 1b .. His goal is given to the system using the structure in Figure 1c. Give n only this information, the system trie s to pe rform the buying and selling proce ss. First, the system che cks whe the r John has e nough mone y to buy a 336 V. AKMAN AND M. ERSAN Figu re 1 ( a ) . The unit re pre se nting John, an age nt. It ke eps the amounts of John’ s asse ts, loans, and spe ndable mone y. All of the se slots are of inte ge r type . The y all have ce rtain value s none of which is inhe rite d. Figu re 1 ( b ) . The unit re pre se nting the ne wspape r. Figure 1 ( c ) . The unit re pre se nting John’ s goal of buying a ne wspape r. COMMONSENSE ASPECTS OF BUYING AND SELLING 337 Figu re 1 ( d ) . The unit re pre se nting Bill, anothe r age nt. ne wspape r. Although the price and the selle r of the ne wspape r are not given e xplicitly, the system has the comm onse nse knowle dge of what the price of a ne wspape r is and whe re it is sold. In the system, Bill is the proprietor of the corne r store whe re the ne wspape rs are sold Figure 1d .. Finding out that John has e nough mone y and the current . owne r of the ne wspape r is B ill, the system ge ne rates an item transfe r Figure 1e . from Bill to John and a m one y transfe r Figure 1f . from John to B ill. It de duce s the commonsense knowle dge that whe n a ne wspape r is sold the owne rship change s by giving the item physically. Sim ilarly, it de duce s that the payme nt is made in cash and no payback will occur be cause it is not state d that John has paid an e xce ss amount of mone y to B ill. Afte r the buying and selling proce ss is over, Bill’ s spe ndable mone y has incre ase d Figure 1g . and John’s has de cre ase d Figure 1h .. The ne w owne r of the item is John Figure 1i .. Figu re 1 ( e ) . The transfe r of the ne wspape r from Bill to John. 338 V. AKMAN AND M. ERSAN Figu re 1 ( f ) . The transfe r of m one y from John to Bill. Profit and Loss in Buying and Selling In ge ne ral, se lling proce sse s are profit oriented. A selle r’ s, e spe cially a shopke e pe r’s, main aim is to make profit. Nobody wants to sell an ite m to lose mone y. But the re are some e xce ptions. The selle r may ne e d Figur e 1 ( g ) . The unit re pre se nting Bill after the proce ss is ove r. COMMONSENSE ASPECTS OF BUYING AND SELLING 339 Figur e 1 ( h ) . The unit re pre se nting John after the proce ss is ove r. some amount of m one y urge ntly. In this case, he sells an item without conside ring profit. In anothe r case , the se lle r knows or strongly gue sse s that if he doe s not sell a particular kind of item with a little loss, he will not be able to se ll it in the future at all. The refore, he can acce pt to lose some mone y. Also, in som e case s, se lle rs sell an ite m with loss de libe rate ly because the y e xpe ct othe r kinds of profit from this selling process. The profit may be in cash or in some othe r form e .g., to make some othe r se lle r lose mone y or e ven to make som e one go bankrupt .. Ite ms have two type s of price : purchase price and sale price . In a buying and se lling proce ss, if the sale price of the item involved is greate r than the purchase price of the ite m, the selle r make s a profit. The am ount of profit is the differe nce of two price s of the ite m. If the sale price is le ss than the purchase price , this indicate s a loss for the se lle r. Afte r the buying and selling proce ss is pe rforme d, the purchase price of the ite m is change d to the sale price . If the ne w owne r of the ite m wants to do so, he can de te rmine the ne w sale price of the ite m. Figu re 1 ( i ) . The unit re pre se nting the ne wspape r after the proce ss is ove r. 340 V. AKMAN AND M. ERSAN W hile de te rmining the ne w sale price , the owne r of the ite m knows that, in ge ne ral, the sale price of the ite m should not be much more or le ss . than the marke t price of that ite m. The system also takes into account the de preciation of the goods e spe cially for se cond-hand goods. and the inflation rate whe n calculating the profit and loss. De pre ciation is the loss in value due to physical de te rioration we ar and te ar . as we ll as the obsole sce nce of a durable good. It is also conside re d as the cost of owning an asse t for, say, a year. Among a varie ty of de pre ciation me thods based on the price of the durable good, the most comm on one is straight-line de preciation. According to this me thod, the same fraction of the original price is charge d to curre nt costs e ach ye ar of the e xpe cted use ful life of the durable good. So if one buys a use d car for $600 and e xpe cts to use it for 6 ye ars, the n at the e nd of e ach ye ar from the price. As a re sult, if he se lls his se cond year, it should not be conside red The the ory doe s not cove r the notion he should de duct $100 dollars car for $450 at the e nd of the as a loss, but a profit of $50.7 of profit and loss of the buye r, which might occur whe n an age nt buys an ite m for a highe r or lowe r. price than the market price . Howe ve r, if an age nt has alternatives, he pre fe rs to buy an ite m from the se lle r who sells the same ite m for a lowe r price. Sim ilarly, a selle r pre fers to se ll his ite ms to the age nt who makes the be st offe r. Buying in Installments In a buying and se lling proce ss, if the se lle r and buyer agree , the buye r doe s not have to pay the whole price of the item imme diate ly. The se lle r and the buye r can agree on a payme nt plan according to which the buyer pays the price of the item in portions at prede fine d date s. This is known as buying in in stallm en ts. This kind of buying can occur whe n the price of the ite m involved is more than a certain amount. This amount change s according to the time and place , but it is com mon knowle dge that nobody buys bre ad in installme nts. O nly if the price of the ite m is 7 Similarly, assume that a shopke e pe r buys a came ra for $100, ke e ps it in stock for a ye ar, and the n se lls it for $105. The shopke epe r would not have made any profit, if the inflation rate turns out to be highe r than 5% . COMMONSENSE ASPECTS OF BUYING AND SELLING 341 high e nough to buy it in installme nts m ight buye rs prefe r this kind of buying. He re, agre e m e nt of the se lle r and the buye r is the most important point. The amount of the installme nts and the date s whe n the y will be honore d are de cide d. The se are usually diffe rent for differe nt se lle rs and buye rs at differe nt tim e s. A se lle r m ay want some kind of assurance from a buye r that the buye r is able to pay that amount of m one y. For e xample , if the buye r has som e docume nts indicating that he has a re gular salary, the n the se lle r might be convince d. In ge ne ral, the agre e me nt is not ve rbal; some docum e nts are prepared and signe d by both the buye r and the se lle r. The re fore , the buyer has to pay all the installme nts in time . If he doe s not, the se lle r has the right to sue the buyer or to repossess the sold ite m .. Similar conside rations apply to the se lle r; spe cifically, he has to give the item to the buye r in tim e . Usually the buyer pays a ce rtain amount of the ite m’s price in advance and the re st of the m one y is divide d into e qual . payme nts. W he n the buyer is willing to pay m ore in advance , the portions be come sm aller in amount or in numbe r.8 De pe nding on the agree me nt reache d be twe e n the buye r and se lle r, the buye r rece ive s the ite m e ithe r afte r the agre e m e nt is made or after all of the installm e nts are paid. O the r conditions be ing e qual, buye rs would usually prefer the forme r option. Loan An important proce ss in e conomic life is the borrowing of m one y and ite ms. It can be de fine d as taking or re ce iving som e thing for a ce rtain time , inte nding to return it. If an age nt borrows an item, he can use it for a time pe riod. The important point is that only the user of the ite m change s, the owne r of the ite m doe s not. Some time s, pe ople borrow ite ms from the ir frie nds and do not pay anything in return e xce pt, probably, a word of thanks .. If an age nt borrows an item from a shop 8 While de ciding the amount of installme nts, the rate of inflation should be take n into conside ration. The total amount of mone y that the se lle r will ge t should be high e nough to com pe nsate for the loss arising from inflation. Thus, the price of the ite m is augm ente d by an am ount accordin g to the curre nt annual inflation rate and the n divide d into portions. If the inflation rate is I, price of the ite m is P, am ount paid in advance is A, and num be r of installm ents is M, the n the amount of installme nts should be at least P IMr 12 . q 1 . y A .r M. 342 V. AKMAN AND M. ERSAN i.e ,. re nting ., he should pay for it. The se conce pts are not covere d in this the ory. W e will mainly de al with le nding and borrowing mone y. So we can conside r a loan as a way age nts incre ase the ir spe ndable mone y for a certain time pe riod. W he n an age nt wants to borrow m one y he should first find a le nde r. The re are ge ne rally three type s of le nde rs: An age nt who is a re lative or a friend. An age nt whose profession is le gally to le nd mone y, such as a bank. An age nt who ille gally le nds mone y, such as a usure r. The borrower should re turn the mone y in a ce rtain am ount of tim e e ithe r by paying the whole amount or by paying by installme nts. This usually de pe nds on who the le nde r is. If the le nde r is a friend, the amount to be borrowe d cannot be m ore than a ce rtain am ount, which is gene rally proportional to the we alth of the le nde r. De pe nding on the amount borrowe d and the pay date , e ithe r no or low intere st will be paid. If the le nde r is an age nt whose reason for e xiste nce is le nding mone y, such as a bank, the borrowe r m ust have some assurance to offe r the bank. The amount of m one y the bank will le nd is proportional to this assurance . In addition to the assurance, the borrower should not have any se rious de bts to othe r age nts in orde r to borrow m one y from a bank. The re is always some intere st involve d, and the pay dates are strict. If the loan is not paid back on time , the age nt m ay be charged some m ore m one y or the bank may seize the ite ms that we re offere d as an assurance . If the age nt borrows mone y from an usure r, the inte rest rate is ge ne rally highe r than that of the bank. Some usure rs do not ne e d an assurance , but if the mone y is not returne d on tim e the borrowe r might be in trouble in countle ss ways. Barter In our pre liminary study of the ontology E rsan e t al., 1993 ., we de alt only with buying and selling pe rforme d using m one y. This should not be conside red the only way to obtain an item , as the illustration prece ding this pape r shows. Barte r is an alternative for the same proce ss. It is de fine d as the dire ct e xchange of ite ms of e qual value without the use COMMONSENSE ASPECTS OF BUYING AND SELLING 343 of curre ncy. In fact, in time s whe n m one y did not e xist barter was the only way to obtain items. The barte ring proce ss starts whe n an agent wants a spe cific ite m and has some othe r ite ms to offe r for this ite m. Anothe r age nt who owns the spe cific ite m and is willing to e xchange it with the offe red ite ms should also e xist. The proce ss e nds with the e xchange of ite ms and can be conside re d as consisting of two ite m transfers. The important aspe ct of barte r is a de sire to e xchange. How do age nts de cide that two ite ms may be e xchange d? O ne answe r would be that this de pe nds on the value s of ite ms, but the te rm value is also intricate. V alue is the ratio in which the unit of me asure of one thing e xchange s for a m ultiple , or fraction, of the unit of me asure of any othe r de te rminate thing. For instance , we may say that the value of a ce rtain kind of whe at, at a given time and place, is 30 shillings, if a quarter of such whe at is actually e xchange d, at that tim e and place , for 30 shillings. V alue , in othe r words, is a mathe matical proportion be twe e n two quantities of we alth e xchange d against one anothe r in a given marke t. Agents assign value s to items according to differe nt crite ria. O ne is the price of the ite m; anothe r is the ``craving’’ of the age nt for that item . Some item s, although che ap in price , may have great private value e .g., a broken watch inhe rite d from a grandfathe r .. O ne othe r crite rion that de cide s the value is the time and place in which the barte r takes place. If an ite m is not produce d or e asily found in a country, its value is greate r than the same kind of ite m’s value whe re it is produce d. As a re sult, value is affe cted by many factors such as e conom ical, psychological, and historical factors. The main proble m with barter, and the reason it is rarely practice d, is that the age nts must have a double coincide nce of wants Froyen & Gre e r, 1989 .. Such match-ups scarce ly e xist in the re al world.9 IM PLEMENTATION Knowledge Engineering Environment In the imple me ntation of the the ory, KE E is use d as a software de ve lopme nt tool KE E , 1993 .. This is a knowle dge system de velopme nt product that provide s software de velope rs with a se t of programming 9 For e xample , to work as a McDonald ’s counte r atte ndant, one would have to be willing to exchange 6 hour of daily labor se rvice s for some thing like six Big Macs and two Coke s pe r day eve ry day! 344 V. AKMAN AND M. ERSAN tools and technique s for building applications to repre sent and analyze knowle dge . KE E has a frame system . The basis of this system is a unit. Units are similar to frame s. The y re prese nt the objects in the the ory. Units contain a numbe r of slots. Slots are use d to de scribe the attribute s of obje cts and can hold num e rical data, text, table s, graphics, pointe rs to othe r units, and proce dure s written in Lisp. Units can be organize d into hie rarchie s, e nabling the knowle dge base to be constructed in a m ore logical manne r Figure 2 .. Couple d with KE E ’ s inhe ritance me chanism, this allows e fficie nt storage and re asoning. In our system commonsense knowle dge is de duce d using a numbe r of rule s. The se rule s are imple me nte d in the Rule system w sic x of KE E . Rule s, like any othe r data structure in KE E , are in the form of units and can be organize d into classes. W hat the Rule system doe s is to prove the conclusions of a rule using the pre mise s of the rule . W he n the pre mise s of a rule can be shown to hold by the information in the knowle dge base, the conclusions are de duce d to be true . The Rule system supports both forward and backward chaining. Figu re 2. A sample view of the hie rarchy of some units in the syste m. COMMONSENSE ASPECTS OF BUYING AND SELLING 345 As for the rule s the m se lve s, the y m ay se e m to be token rule s that re prese nt num e rous similar rule s that would be ne e de d. Since we do not have thousands of such rule s, we should indicate this, and provide a fee ling for the ir cove rage . The proble m is that som e rule s are re al de faults; as we treat the individual instantiations of e ve ry re al-world situation, the re will be a ne e d for de fault re asoning Ginsbe rg, 1987 .. The re are assorted proposals in the AI literature to pe rform the latter and the re fore we do not, in this pape r, de lve into the spe cifics of de fault rule s. Implementation D etails Units. The re are e ight main units: age nt, ite m, mone y, shop, transfe r, want.buy, want.borrow, and want.barter. Agent re prese nts the agents involved in the buying and selling proce ss. Age nts can be pe ople or organizations. Buye rs and se lle rs are introduce d to the system as m e mbe rs of this unit. It has three slots: assets, loan, and spe ndable .mone y. Item re prese nts the item involved in the buying and selling process. The re is no limit on the num ber and kind of items that can e xist in the system. The re are five slots of this unit: ite m.kind bre ad, apple , car, house , e tc.., ite m .type m ovable , se rvice , re al e state . , own e r, purchase .price, sale .price , durability durable , non.durable ., life .time , and age . Money holds the common attribute s of mone y in differe nt forms that an age nt can have . It has two slots, holde r and balance , and two subclasse s, cash and account. Cash re prese nts the mone y that an age nt has in cash. Account re prese nts the accounts of an age nt, with an additional slot account.administrator. Bank.Account and Cre dit.Account are two subclasses of account. Bank.Account de scribes the bank account of an age nt. Credit.Account de scribe s the cre dit card account of an age nt. It has one additional slot, lim it, that indicates how much cre dit an age nt has. Shop re pre sents the shops in which the buying and selling takes place . The kinds and the numbe r of shops in the system are not limite d. This unit has two slots: kee pe r and shop.type pharm acy, re al e state age ncy, e tc... Transfer re pre se nts the transfe rs pe rforme d in buying and selling. It has two subclasses, ite m.transfe r and mone y.transfer, and two slots that de scribe the common attribute s of the transfe rs: from.location 346 V. AKMAN AND M. ERSAN and to.location. Item.Transfer repre sents the transfer of ite ms in buying and selling. It has two additional slots: item.transfe rred and ite m.transfe r.mode . Money.Transfer repre se nts the mone y transfe r from buyer to se lle r in a buying and se lling proce ss. This unit is also use d whe n the buyer should rece ive change from the se lle r. Its main slots are am ount.transferre d, mone y.transfe r.mode cash, che ck, credit card ., and curre ncy. Want.Buy repre sents a de m and for buying an ite m. W he n an age nt wants to buy an item, this unit is use d to hold the information of the buying and se lling process. It has five slots: what.item, which.age nt, price , se lle r, and profit.loss of the selle r .. Want.Borrow re prese nts a de m and for borrowing mone y. This is the unit used to hold the information of the borrowing proce ss and has se ven slots: borrowe r, amount.borrowe d, le nde r, category frie nd, bank, usurer ., pay.date, intere st, and assurance . Want.Barter is the unit which holds the ne ce ssary information about a barte ring proce ss. It is use d whe n an age nt wants to e xchange one of his ite ms with anothe r age nt’s ite m. The slots of this unit are first.age nt, wante d.ite m, offere d.ite m, and second.age nt. Rules. The infere nce me chanism of the system is provided by a numbe r of rule classes built into the Rule system. To make the re asoning m ore e fficie nt, the rule s are groupe d into classe s. De pe nding on the type of knowle dge e nte re d, a ce rtain rule class is trigge red and ne w facts are adde d to the knowle dge base. Among the se rule s, some can be re garde d as de faults, that is, rule s for de fault reasoning. Using the se rule s, it is possible to de rive conclusions de spite the absence of total information. Currently, the system contains four rule classes: item .rule s, m one y.rule s, want.buy.rule s, and transfer.rule s. Item.Rules is triggered whe ne ve r a ne w ite m is created. It contains rule s that de duce the sale price and type of e ach ite m, that is, whe the r it is re al e state, service , or movable . The se rule s are de faults and are activated if the user doe s not provide total information. W he n an ite m is cre ate d, its owne r and kind should be spe cifie d. Some of the rule s translate d to E nglish . are as follows: If If If If the the the the sale price of bread is not spe cifie d, the n it is a couple of dollars. sale price of a car is not spe cified, the n ask the use r. ite m is a ne wspape r, the n it is a movable item . ite m is a haircut, the n it is a service. COMMONSENSE ASPECTS OF BUYING AND SELLING 347 The re is one more rule stating that whe n a real e state is create d, the ne t worth of the owne r of this item is incre me nted by the value of that item . Money.Rules is trigge re d e ach time a mone y unit is create d; this can be e ithe r cash, bank.account or cre dit.account. It updates the amount of the spe ndable m one y of the age nt who owns this mone y. Some rule s: If an age nt is give n cash, the n his spe ndable mone y increases by the am ount of the cash. If an agent is given a bank account, the n his spe ndable mone y incre ase s by the amount of the account balance . If an age nt is give n a V isa account, the n his spe ndable mone y incre ase s by the amount of the lim it of that account. Want.Buy.Rules can be conside re d to be the he art of the system be cause whe n a buying and se lling proce ss occurs, this rule class is triggere d. The age nt and the ite m he wants to buy should be spe cified. The se lle r and the amount of mone y offe re d are optional. If the se are not spe cifie d by the user, the se lle r is de duce d using transfer.rules and the mone y given is assume d to be e qual to the price of the item . Using the purchase and sale price of the item, the profit or loss of the se lle r is calculate d. If the conditions for a buying and se lling e vent are satisfie d, the system create s a corre sponding m one y transfe r and an ite m transfe r automatically. Som e e xample rule s are : If an age nt wants to buy an ite m from a selle r and has e nough mone y, the n a mone y transfer from the age nt to the se lle r and an ite m transfe r from the selle r to the age nt occur Figure 3 .. If the mone y that the age nt give s is not spe cifie d, the n assume that the age nt give s the e xact price of the ite m, not m ore . If the sale price of the ite m is greate r than its purchase price, the n the profit of the se lle r is the differe nce be twe e n the sale and purchase price s. If the sale price of the item is le ss than its purchase price, the n the loss of the se lle r is the diffe rence be twe e n the sale and purchase price s. Want.Borrow.Rules is triggered e ach time an age nt wants to borrow an amount of mone y from anothe r age nt, which can be e ithe r a frie nd, a bank, or a usure r. The borrowe r and the amount of be 348 V. AKMAN AND M. ERSAN Figu re 3. An e xample of how rule s are im ple me nte d in KE E. He re , Lisp comm ands and the rule structure of KE E are com bine d. This rule is activate d whe n an age nt wants to buy an item . It is che cke d whe the r the age nt has enough m one y and the se lle r is known by the syste m. If the pre mise s are satisfie d, the syste m ge ne rate s an ite m transfe r and a corre sponding mone y transfe r, filling the slots of the se units with the ne ce ssary inform ation. borrowe d must be spe cifie d. If the inform ation about the othe r slots is not give n, it is de term ine d by de fault rule s such as the following one s. If all the conditions are satisfied, a mone y transfe r is create d from the le nde r to the borrower. Some of the rule s are : If an agent wants to borrow som e m one y from anothe r age nt who is willing to le nd it, a mone y transfe r from the le nde r to the borrowe r occurs. A bank is willing to le nd mone y only if the borrowe r has some assurance and little or no de bt to the othe r age nts. The amount of mone y a bank will le nd is proportional to the borrowe r’s assurance. If an age nt borrows from a frie nd le ss than a couple of hundre d dollars for a couple of months, no intere st will be charged. COMMONSENSE ASPECTS OF BUYING AND SELLING 349 If the le nde r is not spe cifie d and the amount of m one y to be borrowe d is more than a couple of hundre d dollars, the n the le nde r is a bank. Want.Barter.Rules is triggered whe ne ver the re is a de mand for barte ring. The age nt who wants to barte r should spe cify the item he wants, know the owne r of that ite m, and offe r one of his items in e xchange . If the othe r age nt acce pts this offe r, the barter takes place . Some of the rules in this class are : If an age nt wants to barter an item from anothe r age nt offering an ite m, see if the age nt is willing to e xchange his item with the offere d one . If both age nts agree on the barter, two ite m transfers occur. Transfer.Rules is trigge re d whe n a mone y or ite m transfe r is cre ate d by the want.buy.rule s and fills the re quired slots of the se transfers. If the se lle r of an ite m transfe r has not bee n spe cifie d during a buying and selling proce ss, a group in this class of rule s de duce s the comm onse nse knowle dge of who the selle r is. Anothe r function of the se rule s is the balancing of mone y, bank, and, say, V isa accounts. So e ach time a mone y transfer occurs, the balance of the se lle r is incre ase d while that of the buye r is de cre ase d. This rule class also de te rmine s whe the r the selle r will re turn change to the buye r. In this case a ne w mone y transfe r occurs from the se lle r to the buyer. The mone y transfer mode of the proce ss is de te rmine d. If the mone y transfer mode has not bee n spe cifie d and the am ount that is to be transferre d is le ss than some fixed am ount, the n it is assume d to be a cash transfer. O the rwise, the user is asked to e nter the transfe r mode . The ite m transfer mode is de te rmine d according to the type of the ite m. The re are rule s that de term ine the ne w owne r of an item after an ite m transfer and how the asse ts of an agent change whe n the item transferre d is re al e state. Some of the rule s in this class are: If not spe cified, the n the selle r of apples is the gre e ngroce r. If not spe cified, the n the selle r of a house is a re al e state age ncy. If a mone y transfe r is made in cash, the n both the am ount of cash that the selle r owns and the amount of his spe ndable mone y incre ase . If a mone y transfe r is made by a che ck, the n both the balance of the buyer’s bank account and the amount of his spe ndable mone y de crease. 350 V. AKMAN AND M. ERSAN After an ite m transfe r, the ne w owne r of the ite m is the age nt who bought it. C ONC LUD ING R EMAR KS This pape r sum marize d the imple me ntation of a preliminary mode l for comm onse nse buying and se lling, following in the tradition of Cyc. W e have built a pre liminary microthe ory for buying and selling. In this comm onse nse the ory, the basic objects and e vents of buying and selling are form alize d. W e have covere d a part of the intuitive knowle dge that an age nt should have in orde r to unde rstand the e ve nts involve d in a buying and se lling proce ss. W e have imple me nte d a system that use s this the ory to re pre se nt the ste ps of buying and selling, the re sulting situations, and the commonsense knowle dge involve d in the se situations. It is useful to e xte nd the the ory to cover more difficult notions like stealing, spe nding patterns, liquidity pre fere nce , price fixing, tax, black market, and search for the ade quate price . Se e m ingly innoce nt que stions such as ``Is the re a limit to se rvice availability e .g., an out-of-print book.? ’’ or ``Can an age nt re fuse to pay for a faulty ite m e .g., a tastele ss soup .? ’’ should also be addresse d. Cle arly, the answe r to both que stions should be in the affirmative.. It is also possible to se e a narrowe r scope for the program e xplaine d in this pape r, that is, to show how it can he lp us unde rstand how an e conom ic system made up of many agents making many intelligent . de cisions. This would probably take us to more involved issue s, but it is worth serious conside ration. For e xample , a colle ague has aske d whe the r our program can show what happe ns whe n mone y is introduce d into a barte r e conom y.10 } W e agree that the se are all inte resting } and e qually troublesome que stions and, at this stage , can only add that the y are be ing actively 10 Unfortuna te ly, this is a difficult que stion that has more to do with simulation and game the ory than knowle dge re pre se ntation pe r se . More spe cifically, what happe ns to the aggre gate we alth of the individuals? W hat happe ns to the volum e of trade ? If productio n de cisions are inte grate d into the program, do individuals be come more spe cialize d afte r m one y is introduce d? COMMONSENSE ASPECTS OF BUYING AND SELLING 351 re searche d by us and, we hope , by othe rs. Afte r all, ``w d x oing this job is ne ce ssary, im portant, difficult, and fun’ ’ Haye s, 1985, p. 35 .. R EFER ENC ES Alvarado, S. J. 1990. Understanding Editorial Text: A Com puter Model of Argu m ent Com prehension. Boston: Kluwer Acade mic Publishe rs. Alvarado, S. J. 1992. Argument com pre hension. In Encyclopedia of Artificial Intelligence, ed. S. C. Shapiro, 2nd e d., 30 ] 52. Ne w York: Wiley. Barre tt, M. L., and A. C. Be erel. 1988. Expert System s in Bu sin ess: A Practical Approach. New York: Halste d. de Kle er, J. 1975. Q ualitative and Q uantitative Knowle dge in Classical Me chanics. Te chnical Re port AI-TR-352, AI Laboratory, Massachuse tts Institute of Te chnology, Cambridge . Ersan, M., E. Ersan, and V . Akman. 1993. 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