=Paper=
{{Paper
|id=Vol-1497/dc2
|storemode=property
|title=Towards an Ontology of Economic Value: a Preliminary Analysis
|pdfUrl=https://ceur-ws.org/Vol-1497/PoEM2015_DCPaper2.pdf
|volume=Vol-1497
|dblpUrl=https://dblp.org/rec/conf/ifip8-1/Livieri15
}}
==Towards an Ontology of Economic Value: a Preliminary Analysis==
https://ceur-ws.org/Vol-1497/PoEM2015_DCPaper2.pdf
Towards an Ontology of Economic Value: a
Preliminary Analysis
Barbara Livieri ( )
University of Salento, Lecce, Italy
barbara.livieri@unisalento.com
Abstract. The notion of value and of value creation has raised interest
over the last 30 years for both researchers and practitioners. Although
several studies have been conducted in marketing, value remains and
elusive and often ill-defined concept. A clear understanding of value and
value determinants can increase the awareness in strategic decisions and
pricing choices. Objective of this paper is to preliminary discuss the main
kinds of entity that an ontology of economic value should deal with.
Key words: value, ontology, enterprise modeling
1 Introduction
The concept of value and value creation process have raised the interest of
economists for more than 30 years, spanning from disciplines such as strate-
gic planning to accounting and marketing. Nonetheless, value remains “perhaps
the most ill-defined and elusive concept in service marketing and management”
[8, p. 2], becoming “one of the most overused and misused concepts in the so-
cial sciences in general” [19, p. 428]. As a result, a broader understanding of its
meaning, both from the organization and customer perspective is needed.
In the economic literature, the process of value creation has been mostly
understood from the point of view of the value producer (typically an organiza-
tion) focusing on notions such as profit or revenue, either current or potential, or
again as utility or quality. On the other hand, marketing studies have privileged
the consumer value point of view, focusing on perceived value and customer
experience. We believe that a proper analysis of value needs to take both per-
spectives into account, aiming at a broader understanding based on primitive,
general notions that can ground the meaning of the various value-related terms
used in the business practice. This analysis, beside the theoretical relevance, is
also particularly relevant in practice. Indeed, as stated by Anderson [2, p. 17],
“a theory of value should help us rationally guide our actions”. In other words,
a value theory should help us in the definition of which actions is more appro-
priate to perform, i.e. it is the premise for a theory of rational choice. In order to
actually provide insights for the decision making process, it is useful to account
not only for revenues but, more in general, for value. Value-related information
is used by organizations to (a) increase the awareness in strategic decisions or
(b) for pricing purposes. For a proper understanding of value-related notions
S. España J. Ralyté, P. Soffer, J. Zdravkovic and Ó. Pastor (Eds.):
PoEM 2015 Short and Doctoral Consortium Papers, pp. 99-107, 2015.
100
2 B. Livieri
enterprise modeling is crucial, which can be regarded as the construction and
use of conceptual models to describe, analyse, and (re-)design organizational ac-
tion systems (e.g., business processes, organisational structure, resources) and
information systems (IS) [5]. However, the literature on value modelling is still
in its infancy, and we can’t say nowadays that value modeling is well integrated
with more traditional enterprise modeling activities such as process modeling
and organisational modeling. The relevance of the concept of value requires a
broader understanding. As previously stated, the notion of value is often “ill-
defined” and “misused”. Thus, in order to exploit the benefits of value analysis
and avoid communication problems, a precise and rigorous conceptualization is
needed. This is achievable by means of a foundational approach apt at the de-
velopment of a core ontology. The aim of this research project is to provide a
well-founded ontology (the artefact) to integrate value modeling into enterprise
modeling, with special reference to service systems. In order to do so, we follow
the design science approach [14, 1]. This methodology implies the identification
and motivation of the problem, the definition of the possible solution (Relevance
cycle), the adoption of grounding theories and methods at the state of the art
(Rigor Cycle) and the design of the artefact and its evaluation (Design cycle). In
particular, this work is concerned with the relevance cycle and the rigor cycle of
the process. The evaluation will be performed against the competency questions
that will be defined starting from the literature analysis.
The research project is currently in the rigor cycle. After having outlined the
motivations of this work and clarified the role ontologies could play, we shall
focus here on some first ontological choices (Section 3). These choices are the
result of an analysis of the literature in economics (Section 2) and are set up
on foundational ontologies such as the Descriptive Ontology for Linguistic and
Cognitive Engineering (DOLCE) [16] and the Unified Foundational Ontology
(UFO) [10]. The need for an ontology of value is better clarified in Section
4, where we compare the existing approaches on value modeling against the
identified primitives. Finally, in Section 5 we draw our conclusions.
2 The notion of value in economic literature
Among the years, several authors discussed value and value creation. Nonethe-
less, most of these works result ambiguous in the definition of what is value and
which are its determinants.
In microeconomics a dichotomy has been outlined between value as the sum
of the resources used for the production and value as the utility of products. The
latter is strictly connected to the approach followed in marketing, whose empha-
sis is on value perceived by customers. For this study, we will focus on perceived
value, that, as stated by Sanchez et al., “implies an interaction between a sub-
ject (the customer) and an object (the product); it is comparative, personal, and
situational (specific to the context); and it embodies a preference judgement”
[19, p. 439]. The motivation of this choice lays on its relevance for strategic
decision purposes and on the recursive nature of the microeconomic notion of
Towards an Ontology of Economic Value: a Preliminary Analysis 3
101
value, which also does not contain enough information. With recursive we mean
that, if we follow this approach, we have to keep calculating the value of every
single resource that compose the product, then the resources of the resources
and so on. With respect to the latter point, an example can be given by prod-
ucts where the brand acquire a huge relevance, whereas brand is not quantifiable
as the mere sum of the resources used. In marketing, several works have been
devoted to the analysis of customer perceived value, though without reaching an
agreement. Consumer value has been seen in some works as uni-dimensional, i.e.,
value has some antecedents (or determinants) such as quality, price, brands, etc.,
and in others as multi-dimensional,. i.e. value is a complex concept that embeds
several factors [19]. The first branch includes the price-based approach, first de-
veloped in 1979 by Monroe, who states that value originates from a trade-off
between perceived utility or quality and sacrifice. Later on, Dodds et al. stated
that the “cognitive trade-off between perceptions of quality and sacrifice results
in perceptions of value” [4, p. 308]. Also other factors have been encompassed
as antecedents of value, such as social value, time and effort spent, sacrifice, ben-
efit and personal preference. Among the multi-dimensional approaches, there is
the utilitarian and hedonic value theory, in which not only the instrumental and
functional aspects are accounted for, but also the hedonic ones, i.e., the emo-
tional or non-instrumental responses to the consumption of a product. Another
approach has been defined by Woodall [25] with a taxonomy of customer value
(VC ), highlighting the concept of derived VC , concerning the experience of use
and strictly connected to the notion of use value. In marketing research and, in
particular, in service science, special emphasis has been also put to the concept
of value co-creation [8]. However, for the purposes of this paper, we will focus
only on the general notion of economic value, without considering the implica-
tions of the co-creation process. In this case, the problem – partially addressed
by [8] – of understanding what “value creation” means arises.
3 Some first ontological choices
As a first step towards an ontology of economic value, we present here a prelim-
inary analysis of the main kinds of entity such a theory should deal with. This is
just a rough inventory of the inhabitants of the“value world”, with the purpose
of listing and understanding the main ontological choices we have to make. On
a first attempt, we could say that value is a relational notion: something has a
value for somebody in a context, that is agents ascribe value to entities, such
as objects and events. It seems plausible, therefore, to think of value as a rela-
tional quality of an entity, i.e., a quality that is not intrinsic to the entity, but
is existentially dependent on an agent’s mental attitude. Consistent with this
approach is the definition proposed by Zuniga, who suggests that value is “a
significance attached to a good resulting from a conceptualization of the good
in terms of a desired end. Such a conceptualization can be characterized as an
interested evaluation, since the agent perceives a causal connection between the
possession of the good and the fulfilment of an end” [26, p. 306]. A refinement
4
102 B. Livieri
along this suggestion can be done by distinguishing between the value of ob-
jects and the value of events (including processes). Regarding this distinction,
particularly relevant is the preference theory developed by Sen [22], in which he
distinguishes between culmination outcomes, where only the final outcome of a
certain process determines the value judgement, and comprehensive outcomes,
where the process that brings to the outcome is considered as well. This dis-
tinction clearly emerges from the fruit choosing example discussed in [21]. The
example shows how an individual that, in general, prefers mangos to apples, in
specific social conditions can choose apples instead of mangos because there is
only one mango left: it is not the outcome per se that drives the choice of the
individual, but rather a series of conditions affecting the decision process (e.g.,
num. fruits available, social circumstances). Nonetheless, the same individual
would still appreciate if somebody would give him the mango, without asking
him: so the value of an object (the mango) is clearly different from the value of
a event (a decision process) involving such object. Related to this aspect, it is
worth noticing the difference between the value of a product or a service and the
value of the action performed to obtain it. In the previous example, the mango
has the same value regardless of the external circumstances (who is choosing,
how many mangos there are, etc.), what changes is the value of the action needed
to acquire its possession and disposition. The beneficiary action is more strongly
related to the context, and, as such, also to ethical concerns. The previous exam-
ple brings to light the need to discern who is performing the action, i.e., whether
it is the beneficiary, the provider or a third person. For our purposes, we shall
adopt the comprehensive outcome perspective while dealing with the value of
events, since it seems plausible to assume that, in general, the process involved
in the delivery of products and services affects also customer choices. In addition
to the previous considerations, we have to treat in a different way the context,
according to when value is perceived. For instance, value assigned before the
purchase can be partially or totally independent from the user preferences. So
there is a non-context dependent value and a context dependent value, which is
the one that affects the costumer choice to buy a product. The latter is perceived
and factored in when the product is bought or when the purchase is feasible. In
the opposite case, the customer will assign a potential value, connected to the
practical purposes of the product and how much these purposes are valued in
the society. Thus, both customer preferences and products functionalities need
to be modeled. To clarify this aspect, let us think about a house on sale. One
agent (a) is not looking to buy, while the others – (b) and (c) – are. Walking
in front of the house, they will all assign some kind of value to the house. Since
(a) is not interested in acquiring a house, is perception won’t be affected by his
budget or by specific personal requirements, but it will be more general because
he has no interest in going more in detail, the evaluation happens outside of the
intentional to possess or dispose of the house. Instead, (b) and (c) will take into
account more factors, and specifically the ones related to their requirements. The
comparison of these expectations and the experience of consumption or use gen-
Towards an Ontology of Economic Value: a Preliminary Analysis 5
103
erates the a posteriori value, which is the focus of customer experience analysis
and on which complaints are based.
We can assert that each object has one or more functionalities, meaning with
functionality an “epistemically objective” [20, p. 14] function, i.e., a function
that is not just a matter of the user’s opinion, but it is somewhat accepted by
the society, i.e., it is not an absolute objectivity. The notion of function is useful
to define the derived value or use value as defined in [25], functional value, as
defined in the consumption value theory, and utilitarian value. In this case, the
functions of the product and its ability to fulfill them should be compared to the
desired goals of the customer. Thus, also the notion of achievement as defined
in [16] should be included. Let us think at guns; they have a socially accepted
value (they are sold, they are given to policemen for public defence, etc.), but this
value is different from the value assigned by each individual, who – for instance –
could associate a negative value to guns, due to ethical concerns. Following from
this, we can state that this kind of value is similar to the notion of market value
and sometimes they may coincide, but it is not always the case. This difference
is related to the resource shortage and to its importance. This can be clarified
if we think of water; society assign a high value to water, but the market value
is low because it is available and it is a basic need. These considerations are in
line with Nunes et al. [18], who states that customer preferences can be seen
as the result of goals and constraints. Yet, preferences are determinants not
only of functional, use and utilitarian value, but also of hedonic value. Indeed,
hedonic and emotional value imply the analysis of preferences not only with
respects to products’ functions and features, but also to aspects connected to
the emotional and social sphere. In general, goods and services have a set of
qualities (e.g., temporal and spatial qualities) through which the context can be
defined. Indeed, some products get different values depending on the place or
the time at which they are used. This is the case, for instance, of water in the
desert. From the provider point of view, a broader analysis of the organization is
needed, as well as of the different kinds of costs that the customer will bear. In
other words, the provider has to evaluate the action that constitute the service
offered (e.g., the actions of the customer service unit or for the warranty) and
the actions that the customer has to perform in order to use the product or
service. Thus, it is necessary to take into account the departments involved or
eventually available in order to exploit the commitments related to the product.
The analysis of the organizational structure and behaviour allows to understand
whether it exists a help desk, the possibility to customize products/services,
etc. These aspects constitute additional services, with respect to the product,
offered by the organization. From the customer perspective, they are perceived
as a bundle offer (product plus services), therefore the organizational structure
per se is not relevant for the customer. Instead, from the provider point of view,
its analysis and comparison to the bundle product is useful in order to evaluate
the offer feasibility and to better understand which costs impact on the price.
With costs we do not mean only monetary costs (including, but not limited to,
6
104 B. Livieri
the price), but also non-monetary costs (such as psychological costs, time, effort)
and opportunity costs. The primitives are listed in Table 1.
4 Related works and comparison
Two main approaches have been developed in value modeling literature, namely
the Resource, Event, Agent (REA) Ontology, developed in 1982 by McCarthy
[17], and e3value, developed by Gordjin and Akkermans [6], who proposed a
multi-viewpoint approach for the business model development, accounting also
for a value viewpoint for value creation and exchange process.
The REA ontology describes economic transactions and internal processes
by means of some basic constructs related to organizations, such as resource,
event and agent, with the aim of developing Accounting Information Systems
(AIS). Although REA is concerned with business transactions, the value of the
resources and exchanges is not accounted for. The main notions described in
REA are resource, event and agent. The original model has been extended [15]
in order to include also concepts such as commitment and claim. However, several
issues have been identified in this approach [13], such as the lack of a temporal
dimensions of events and of the definition of the notion of role
e3-value is an ontology-based methodology for defining business models for
business networks [6], commonly used for the modeling value exchanges. It adopts
the economic value perspective by representing what is exchanged and by whom
[7]. The e3-value ontology is based on the principle of reciprocity emphasizing
the dual character of business transactions. This “give and take” approach de-
notes that every actor offers something of value, such as money, goods, services,
etc., and gets a value in return. However, e3-value focuses on the exchanged
value among actors, leaving out the analysis of why value is exchanged, thus
stakeholders’ goals [24] or other aspects such as commitment, organizational
structure, and so on. It defines in an abstract way value objects, without further
analysis concerning their nature or the one of the actors that exchange them.s
5 Discussion and conclusions
This work investigates the notion of value, largely discussed in literature, under
several points of view, but yet not adequately defined and often misused. In
socio-technical systems value analysis, and in particular the analysis of perceived
value, can be highly beneficial, since it can help in decision-making processes
such as which products to offer, at which price and so on. In this sense, a value
theory can be seen as the basis of rational choices. However, the shaping of
value aspects requires a broader analysis, that can be provided by enterprise
models, which offer an abstraction over organizational elements. The misuse
and the lack of a general definition of the concept of value, calls for a precise
and rigorous conceptualization. This can be achieved by means of a foundational
approach apt at the development of a core ontology. With this general aim, we
Towards an Ontology of Economic Value: a Preliminary Analysis 105
7
Table 1. Value related primitives
P rimitive T ype Def inition
Value (and subforms) Relational quality Quality of a product or resource as perceived by
an agentive physical object
Good Endurant object that can be traded and transfered
Service Perdurant complex temporal entity, not transferable, consist-
ing of a service commitment and the corresponding
process [9]
Product Role “role of the good or service [. . . ] that is offered for
sale by a vendor or agreed to be exchanged by the
vendor with the actual customer in a sale” [23, p.
32]
Resource Role role of an endurant that participates in an action
[23, 11]
Customer Role agent who buys a product or request a service and
pays for it
Consumer Role agent who is beneficiary of the product
Preference Mental individual [11] Mental state of a customer that is more inclined
to specific characteristics
Goal Proposition [11] “propositional content of an intention” [3, p. 182]
Constraint Role restrictions on the use of a functionality
Function Role observer-relative feature assigned to a product by
the society
Price Abstract quality monetary amount assigned to a product by the
provider
Cost (and subforms) Abstract quality A sacrifice – monetary or not – endured by an
agent in order to obtain a product
Commitment Social moment [11] promise of an agentive physical object towards
other agents
Person Agentive physical ob-
ject
Market segment Non-agentive social segment of customers to which the product is di-
object [16] rected
Atomic event Event “event that happens instantaneously”. [12, p. 358]
Complex event Event event resulting from the composition of other
events [12]
Process Complex event complex event made by events in sequence [12, 16]
Achievement Atomic event atomic eventive occurrence [16]
perform an interdisciplinary analysis of literature based on value theory and on
marketing. Based on the existing literature, we perform a preliminary analysis
of the main kinds of entity that an ontology of economic value should deal with.
Part of these kinds of entity (e.g., event, complex event, atomic event, process,
achievement, goal) are already defined in foundational ontologies such as the
Descriptive Ontology for Linguistic and Cognitive Engineering (DOLCE) [16]
and the Unified Foundational Ontology [10]. The other kinds of entity were
connected to notions already defined in these ontologies. Finally, we compare
8
106 B. Livieri
these enitities to the ones available in e3value and REA. It emerged that, only
some of the concepts are defined and the ones available need further investigation
investigation. Indeed, the literature on value modelling is still in its infancy, and
value modeling is not well integrated with more traditional enterprise modeling
activities such as process modeling and organisational modeling. Future works
will move towards the general objective, i.e., to provide a well-founded framework
to integrate value modeling for services into enterprise modeling.
Acknowledgments. This work has been conducted at the Laboratory of Ap-
plied Ontologies – LOA-ISTC, Trento, as a visiting PhD student, under the
supervision of Nicola Guarino.
References
1. von Alan, R.H., March, S.T., Park, J., Ram, S.: Design science in information
systems research. MIS quarterly 28(1), 75–105 (2004)
2. Anderson, E.: Value in ethics and economics. Harvard University Press (1995)
3. Barcellos, M.P., de Almeida Falbo, R.: Using a foundational ontology for reengi-
neering a software enterprise ontology. In: Advances in Conceptual Modeling-
Challenging Perspectives, pp. 179–188. Springer (2009)
4. Dodds, W.B., et al.: Effects of price, brand, and store information on buyers’
product evaluations. Journal of marketing research pp. 307–319 (1991)
5. Frank, U.: Multi-perspective enterprise modeling: foundational concepts, prospects
and future research challenges. SoSyM 13, 941–962 (2014)
6. Gordijn, J., Akkermans, H.: Designing and evaluating e-business models. IEEE
intelligent Systems (4), 11–17 (2001)
7. Gordijn, J., Akkermans, J.: Value-based requirements engineering: exploring inno-
vative e-commerce ideas. Requirements engineering 8(2), 114–134 (2003)
8. Grönroos, C., Voima, P.: Critical service logic: making sense of value creation and
co-creation. Journal of the Academy of Marketing Science 41(2), 133–150 (2013)
9. Guarino, N.: Services and service systems under a mesoscopic perspective. Service
Dominant Logic, Network and Systems Theory, and Service Science: Integrating
three Perspectives for a New Service Agenda (2013)
10. Guizzardi, G.: Ontological foundations for structural conceptual models. CTIT,
Centre for Telematics and Information Technology (2005)
11. Guizzardi, G., et al.: Grounding software domain ontologies in the unified founda-
tional ontology (ufo). In: CIbSE. pp. 127–140 (2008)
12. Guizzardi, G., Wagner, G.: Some applications of a unified foundational ontology in
business modeling. Business Systems Analysis with Ontologies pp. 345–367 (2005)
13. Hessellund, A.: Modeling issues in rea (2006)
14. Hevner, A.R.: A three cycle view of design science research. Scandinavian journal
of information systems 19(2), 4 (2007)
15. Hruby, P.: Model-driven design using business patterns. Springer (2006)
16. Masolo, C., et al.: Wonderweb deliverable d18. ICT project 33052 (2003)
17. McCarthy, W.E.: The rea accounting model: A generalized framework for account-
ing systems in a shared data environment. Accounting Review pp. 554–578 (1982)
18. Nunes, I., et al.: Natural language-based representation of user preferences. Inter-
acting with Computers p. iwt060 (2013)
Towards an Ontology of Economic Value: a Preliminary Analysis 107
9
19. Sánchez-Fernández, R., Iniesta-Bonillo, M.Á.: The concept of perceived value: a
systematic review of the research. Marketing theory 7(4), 427–451 (2007)
20. Searle, J.R.: The construction of social reality. Simon and Schuster (1995)
21. Sen, A.: Maximization and the act of choice. Econometrica: Journal of the Econo-
metric Society pp. 745–779 (1997)
22. Sen, A.: Development as freedom. Oxford University Press (2001)
23. Uschold, M., et al.: The enterprise ontology. The Knowledge Eng. Review 13 (2007)
24. Weigand, H., et al.: Strategic analysis using value modeling–the c3-value approach.
In: 40th HICSS. IEEE (2007)
25. Woodall, T.: Conceptualising ‘value for the customer’: an attributional, structural
and dispositional analysis. Academy of marketing science review 12(1), 1–42 (2003)
26. Zuniga, G.L.: An ontology of economic objects. American Journal of Economics
and Sociology 58(2), 299–312 (1998)