Introduction to the Special Issue: Formal Aspects of Digital Commerce

Steven O. Kimbrough and Ronald M. Lee, Guest Editors
International Journal of Electronic Commerce,
Volume 3, Number 2, Winter 1998-99, pp. 3.

Abstract: The term electronic commerce includes all types of commerce mediated through electronic media, including electronic mail (e-mail), multimedia, and the like. Indeed, given the current convergence of computer networks with other forms of communication media, the notion of electronic commerce might also include various forms of images, audio and video (e.g., the digital counterparts of fax, telephone, television, and even telegraph). By digital commerce, we mean a focus on the subset of electronic commerce wherein communication is recognized symbolically (“understood”) by the computer-enabling applications, where the computer is able to make inferences about the content and structure of the communication, thereby facilitating and mediating commercial trade. More specifically, this implies that the symbols of the communication are formalized in some way, having an explicit syntax and semantics. EDI is an elementary example. The ones envisioned in this Special Issue will be much more dramatic and exotic. Although the focus here is on technology for electronic commerce, it is important to appreciate the categories of technology with which we are concerned. In the field of information systems, it is common to distinguish effective (or logical or semantic) access to information from efficient (or physical) access to information. To use a familiar analogy, if the problem is to get a book from the library, then the efficiency question may be put as, “Given the call number of the book, how can it be retrieved as quickly and as cheaply as possible?” On the other hand, the effectiveness (or logical) question may be put as, “Given my needs and interests, which books should I try to get?” This Special Issue is concerned almost entirely with problems of effective access to information. Assuming that the physical access problem is solved to a known degree (i.e., networks are in place, messages can be sent at a certain attractive rate and for a certain attractive cost), then what? The most interesting technological questions can begin to be addressed only after this assumption is credible.

Some Examples of Digital Commerce Some examples of activities falling under the foregoing definition of digital commerce are as follows.

Digital Payments Digital payments between banks are probably among the oldest and most established electronic commerce applications, in the form of electronic funds transfer (EFT). Currently, numerous new alternatives are being developed to support consumer payments for digital shopping, including so-called cybercash, or digital coinage, and for making micropurchases, such as in pay-per-click Web browsing.

Electronic Auctions The electronic auction type of application has been growing rapidly in recent years, not only in automating existing markets (e.g., for cut flowers or used cars) but also by allowing small niche auctions (e.g., for department store overstocks or unfilled airline seats). Whereas electronic auctions might seem suitable only for commodities whose relevant purchase attributes are quantified, they have also been occurring for such unique items as art, antique furniture, antique cars, and houses. In these latter cases, multimedia may be used, and there may be a physical inspection by a third-party inspector. Another important feature of digital auction markets is the ability to monitor market activity (e.g., detection of dumping or market manipulation) more effectively.

Electronic Contracting Electronic contracting refers to the negotiation and performance monitoring of contracts via digital networks. Again, the main benefit is the potential for computer mediation (e.g., in the automatic logging of documentary evidence, the verification of legal controls, the detection of performance satisfaction or breach, e.g., late payments). Key issues for electronic contracting relate to performative communications, where the communication not only conveys information but is also legal evidence of a commitment (e.g., a contract offer) or a right (e.g., electronic airplane tickets, electronic payment orders). These issues are not simply technological. They also require suitable modifications of the legal system (e.g., in the definition of a legal writing, signature authentication, uniqueness of evidence, negotiable documents).

Digital Bureaucracies Government agencies, especially those providing social services, are also moving toward an electronic commerce orientation and presence. Best known is the electronic commerce initiative of the U.S. Department of Defense in circulating its RFPs (request for proposals) electronically. Other future developments may include digital interfaces for unemployment (checking jobs available), income tax advice and filing, and visa applications.

Global Supply Chains and Logistics This is another high-potential application area that is just beginning to emerge. In recent years, there has been a great deal of internationalization in supply chains, and also (especially in the past few months) considerable worldwide instability. To sustain competitive advantage, it is not enough for firms to construct efficient supply chains. They must also have the flexibility to modify and redesign their supply chains to respond to sudden economic changes. Open-EDI and electronic trade scenarios offer promise in respect to these challenges.

Overview of Papers Six papers appear in this Special Issue. They cover a range of problems and methodologies extending from the descriptive/empirical to the formal/mathematical.

The first paper, “Framework for Specifying, Building, and Operating Electronic Markets,” by Markus A. Lindemann and Beat F. Schmid, serves as a useful overview of the problem domain by presenting a framework of analysis for digital commerce applications. Their classification forms a kind of matrix with transaction phases (information, agreement, settlement) along one dimension, and views (business, process, transaction, and infrastructure) along the other. They use this framework to analyze the current population of digital commerce applications, and point to promising new areas of experimentation and development.

The second paper, ” Formal Language for Business Communication: Sketch of a Basic Theory,” by Steven O. Kimbrough, sets a more formal tone. In his FLBC work, Kimbrough seeks to identify the requirements for formal, logic-based languages that would have sufficient representational expressiveness to capture the concepts of contracting and other forms of doing business. Such languages would make it possible for intelligent computer applications to assist in reasoning about business matters of these kinds in the same way that businesspeople (and their lawyers) do at present. A key contribution of this paper is the role of event semantics in achieving this.

The next paper, “Meta-Patterns for Electronic Commerce Transactions Based on the Formal Language of Business Communication (FLBC),” by Hans Weigand and Willem-Jan van den Heuvel, also contributes to formal languages for business communications by relating them to the various kinds of abstraction hierarchies of object-oriented systems. These abstractions, which they call meta-patterns, range from speech acts at the lowest level to scenarios at the highest. By exploiting object inheritance, the authors hope to gain economy and reusability of representation.

Following this, “Specifying Deadlines with Continuous Time Using Deontic and Temporal Logic,” by Frank Dignum and Ruurd Kuiper, explores another aspect of formal business communications, namely, the formalization and reasoning about contractual obligations and their associated deadlines. This presents some interesting logical challenges, involving a combination of action (dynamic), temporal, and deontic logic.

“A Logical Model of Directed Obligations and Permissions to Support Electronic Contracting,” by Yao-Hua Tan and Walter Thoen, provides a useful companion paper to the preceding one by elaborating on the agency aspects of contractual obligations and the issues they present for formal representation.

The final paper, “Distributed Electronic Trade Scenarios: Representation, Design, Prototyping,” by Ronald M. Lee, returns us to a more practical perspective of how formal representations can be utilized in working applications. The paper presents a representation, called “documentary Petri nets,” which combines predicate logic (for static descriptions) with Petri nets (for dynamic descriptions), that is used for modeling complex trade scenarios in such a way that they may be distributed among legally autonomous parties. There is a description of a tool called InterProcs that provides a graphical interface for designing such scenarios and allows them to be distributed and executed over the Internet.

As editors of this Special Issue, we are pleased to witness and, in some modest way, to support the growth of this topic. We thank the Hawaii International Conference on System Sciences, at which earlier versions of these papers appeared, for a stimulating and productive environment in which these topics could be discussed.

STEVEN O. KIMBROUGH ( is a professor at the Wharton School, University of Pennsylvania. He received his Ph.D. in philosophy from the University of Wisconsin. His main research interests are in the fields of electronic commerce, decision support and expert systems, logic modeling, and computational rationality. His active research areas include computational approaches to belief revision and nonmonotonic reasoning, formal languages for business communication, evolutionary computation (including genetic algorithms and genetic programming), and context-based information retrieval. He is currently co-principal investigator of the Logistics DSS project, which is part of DARPA’s Advanced Logistics Program.

RONALD M. LEE ( is director of the Erasmus University Research Institute for Decision Information Systems (EURIDIS) in Rotterdam, the Netherlands. He is also a research fellow at the Wharton School, University of Pennsylvania. Previously, he was associate professor of information systems in the Management Science and Information Systems Department of the University of Texas at Austin. He has a Ph.D. in decision sciences (University of Pennsylvania, 1980) and previously served as a research scholar at the International Institute for Applied Systems Analysis in Vienna, Austria, and as visiting professor of management at the Universidade Nova de Lisboa, in Lisbon, Portugal.

Dr. Lee’s current research focuses on applications of artificial intelligence and logic modeling to electronic commerce. Current projects involve the use of logic modeling and Petri nets to represent electronic trade scenarios, especially for international, business-to-business trade. Theoretical aspects include the role of deontic and illocutionary logic in representing electronic contracting processes. The practical value lies in the reduction of bureaucratic and legalistic red tape. This work also includes multilingual business communications, supporting structured communications between parties with different native languages.