"> The Free Market System

The Free Market System

A. Introduction

     For many applications, a team of robots can be effectively used. A robot team can accomplish a given task more quickly than a single agent can by dividing the task into sub-tasks and executing them concurrently. A team can also make effective use of specialists designed for a single purpose (e.g., scouting an area, picking up objects, hauling payload), rather than requiring that a single robot be a generalist, capable of performing all tasks but expert at no tasks.
     The difficulty arises in coordinating all of these robots to perform a single, global task. One approach is to consider the robot team to be a single robot ďsystemĒ with many degrees of freedom. A central computer coordinates the group optimally to perform the specified task. The problem is that optimal coordination is computationally difficultóthe best known algorithms are exponential in complexity. Thus, the approach is intractable for teams larger than a few robots. Additionally, the approach assumes that all information about the robots and their environment can be transmitted to a single location for processing and that this information does not change during the time that an optimal plan is constructed. These assumptions are unrealistic for problems in which the environment is unknown and/or changing, communication is limited, and robots behave in unpredictable ways. Another weakness with this approach is that it produces a highly vulnerable system. That is, if the leader (the central planning unit) malfunctions, a new leader must be available or the entire team is disabled.
     Local and distributed approaches address the problems that arise with centralized, globally coordinated approaches. Each robot operates largely independently, acting on information that is locally available through its sensors. A robot may coordinate with other robots in its vicinity, perhaps to divide a problem into multiple sub-problems or to work together on a sub-task that cannot be accomplished by a single robot. Typically, little computation is required, since each robot need only plan and execute its own activities. Also, little communication is required, since the robots only communicate with others in their vicinity. The robots are better able to respond to unknown or changing environments, since they sense and respond to the environment locally. Moreover, the system is more robust since the entire teamís performance no longer depends on the guidance of a single leader. The approach works best for problems that can be decomposed into largely unrelated sub-problems, or problems for which a desired group behavior results from the aggregate of individual behaviors and interactions.
     Consider an economic system for coordinating robots. An economy is nothing more than a population of agents (i.e., citizens) producing a global output. The agents coordinate with each other to produce an aggregate set of goods. Centralized economies, such as socialist/communist systems, suffer from an inability to gather all salient information, uncertainty in how to optimize with it, and unresponsiveness to changing conditions. Additionally, since economic output is divided equally amongst the entire population, individuals have little incentive to work harder or more efficiently than what is required to minimally comply with the economic plan. Individual input is decoupled from individual output. The net effect is a sluggish, brittle, inefficient economy.
     Free market economies are unencumbered by centralized planning; instead, individuals are free to exchange goods and services and enter into contracts as they see fit. Despite the fact that individuals in the economy act only to advance their own self-interests, the aggregate effect is a highly productive society. Individuals are in the best position to understand their needs and the means to satisfy them. Thus, individuals reap the direct benefits of their own good decisions and suffer the direct consequences of their bad ones. At times they cooperate with other members of the society to achieve an outcome greater than that possible by each member alone. At times they compete with other members to provide goods or services at the lowest possible cost, thus eliminating waste and inefficiency. But at every turn, the individual members act solely to reap the greatest profit for themselves. We describe a method for applying these powerful mechanisms to the task of coordinating a team of robots.

B. Determining Revenues and Costs

     Consider a team of robots assembled to perform a particular task. The goal of the team is to perform the task well while minimizing costs. A function, trev, is needed that maps possible task outcomes onto revenue values. Another function, tcost, is needed that maps possible schemes for performing the task onto cost values. As a team, the goal is to execute some plan P such that profit, trev(P) - tcost(P), is maximized.
     But it is not enough to define just the revenue and cost functions for the team. These functions must provide a means for distributing the revenue and assessing costs to individual robots. Preferably, these individual revenues and costs are assigned based on factors over which the individuals have direct control. For example, if the task is to find and retrieve a set of objects, the teamís revenue, trev, could be the number of objects retrieved (converted to a "cash" value), and the teamís cost, tcost, could be the amount of energy consumed by the entire team to find the objects. The individual robot revenues and costs, rrev and rcost, could be the cash value of the number of objects turned in and the energy expended, respectively, by that individual.
     Therefore, the sum of the individual revenues and costs equals the teamís revenues and costs. However, the distribution is not even: individuals are compensated in accordance with their contribution to the overall task, based on factors that are within the control of the individual. An individual that maximizes its own personal production and minimizes its own personal cost receives a larger share of the overall profit. Therefore, by acting strictly in their own self-interests, individuals maximize not only their own profit but also the overall profit of the team.

C. The Role of Price and the Bidding Process

     Robots receive revenue and incur costs for accomplishing a specific team task, but the teamís revenue function is not the only source of income. A robot can also receive revenue from another robot in exchange for goods or services. For example, a robot may not be equipped to find objects for which the team function provides revenue, but it can transport the objects to the goal once they have been found. Therefore, this haulage robot provides a service to the robots that find the objects, and it receives payment for performing such a service.
     In general, two robots have incentive to deal with each other if they can produce more aggregate profit together than apart---such outcomes are win-win rather than zero-sum. The price dictates the payment amount for the good or service. How is the price determined? Assume that robot A would like to purchase a service from robot B. Robot B incurs a cost Y for performing the service. Robot A can make an additional revenue of X if B performs the service for it. Therefore, if X > Y, then both parties have an incentive to execute the deal. But how should the composite profit, X - Y, be divided amongst the two parties? It may sound fair to split the winnings (X - Y) / 2 by setting the price at (X + Y) / 2. But robots A and B may have other opportunities---they may be considering other deals that contend for the same money and resources. Since these factors may be hidden or complex, a common approach is to bid for a good or service until a mutually acceptable price is found. For example, robot A could start by bidding a price of Y (i.e., robot A receives the entire profit). Robot B could decline and counter with a bid of X (i.e., robot B receives the entire profit). The idea is to start by bidding a price that is personally most favorable, and then successively retreat from this position until a price is mutually agreed upon.
     Note that a given robot can negotiate several potential deals at the same time. It begins by bidding the most favorable price for itself for all of the deals, successively retreats from this position with counter bids, and closes the first deal that is mutually acceptable. Note also that a deal can be multi-party, requiring that all parties agree before any part of the deal is binding. The negotiated price will tend toward the intersection of the supply and demand curves for a given service. If a service is in high demand or short supply, the price will be high. This information will prompt other suppliers to enter the fray, driving the price down. Likewise, if demand is low or supply high, the low price will drive suppliers into another line of business. Thus, price serves to optimize the matching of supply to demand.
     Finally, it is important to note that price and bidding are low bandwidth mechanisms for communicating aggregate information about costs. When consumers decide between purchasing apple juice or orange juice for breakfast, they do not analyze land acreage dedicated to both crops, the costs of producing each, the demand for each, and the impact of weather and pest infestations. Instead, they merely look at the price of each and weigh them against their own personal preferences. Yet the price encodes all of these factors in a concise fashion that enables them to make a locally optimal decision based on low-bandwidth information available at the point of sale.

D. Cooperation vs. Competition

     As described in the previous section, robots interact with each other to exchange goods and services. Two robots are cooperative if they have complementary roles, that is, if both robots can make more profit by working together than by working individually. Generally, robot teams foster cooperation between members of different types (heterogeneous). For instance, a robot able to grasp and lift objects and a robot able to transport objects could team together to provide a pick-and-place service that neither one could offer independently.
     Conversely, two robots are competitive if they have the same role; that is, if the amount of profit that one can make is negatively affected by the presence of the other robot. Generally, robot teams foster competition amongst members of the same type (homogeneous). For instance, two robots that are able to transport objects compete for the services of a given grasping robot, thus driving the price down. Either one could charge more money if the other were not present.
     These delineations are not strict however. Subgroups of heterogeneous robots could form that provide a given service. These subgroups would compete with each other, thus providing an example where robots of different types compete rather than cooperate with each other. Heterogeneous robots could also compete if the same task can be accomplished in different ways. Conversely, two robots of the same type may cooperate by agreeing to segment the market. Homogeneous robots can also cooperate if accomplishing a specific task requires more than one robot. For example, several robots with grasping capability may need to cooperate in order to move a heavy object. The flexibility of the market-model allows the robots to cooperate and compete as necessary to accomplish a task, regardless of the homogeneity or heterogeneity of the team.

E. Self Organization

     Conspicuously absent from the free market system is a rigid, top-down hierarchy. Instead, the robots organize themselves in a way that is mutually beneficial. Since the aggregate profit amassed by the individuals is directly tied to the success of the task, this self-organization yields the best results.
     Consider a group of ten robots. An eleventh robot, A, offers its services as their leader. It does not become their leader by coercion or decree, but by convincing the group that they will make more money by following its advice than by acting individually or in subgroups. A does this by investigating "plans" for utilizing all ten robots. If A comes up with a truly good plan, it will maximize profit across the whole group. The prospective leader can use this large profit to bid for the services of the group members, and of course, retain a portion of the profit for itself. The leader may be bidding not only against the individualsí plans, but also against group plans produced by other prospective leaders. Note that the leader acts both as a benevolent and a self-interested agentóit receives personal compensation for efforts benefiting the entire group.
     But there is a limit to this organization. As the group becomes larger, the combinatorics become intractable and the process of gathering all of the relevant information to produce a good plan becomes increasingly difficult. A leader will realize this when it can no longer convince its subjects (via bidding for their services) to follow its plans.

F. Learning and Adaption

     The robot economy is able to learn new behaviors and strategies as it executes its task. This learning applies to both individual behaviors and negotiations as well as to the entire team. Individual robots may learn that certain strategies are not profitable, or that certain robots are apt to break a contract by failing to deliver the goods or proper payment. Individuals may also learn successful bidding strategies or which deals to offer when. The robot team may learn that certain types of robots are in oversupply, indicated by widespread bankruptcy or an inability to make much money. Conversely, the robot team may learn that certain types of robots are in under-supply, evidenced by excessive profits captured by members of the type. Thus, the population can learn to exit members of one type and enter members of another. Moreover, in this approach, successful agents are able to accumulate wealth and perpetuate their winning strategies because of their ability to offer higher payments to other agents.
     One of the greatest strengths of the market economy is its ability to deal successfully with changing conditions. Since the economy does not rely on a hierarchical structure for coordination and task assignment, the system is highly robust to changes in the environment, including malfunctioning robots. Disabling any single robot should not jeopardize the systemís performance. By adding escape clauses for "broken deals", any tasks undertaken by a robot that malfunctions can be re-bid to other robots, and the entire task can be accomplished. Thus, the market model allows the robots to deal with dynamic environments in an opportunistic and adaptive manner.

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