The Living Inventory system puts a timer on items sold to a LIS-equipped store; if the timer expires before anyone purchases the item, the item disappears and the shopkeeper is paid most of what it would have sold for (between 50 and 100%), simulating normal buying, selling, and haggling action amongst villagers. The amount of time provided is random but player-dependent, to a minimum of one hour and a maximum of 72 hours.
Living Inventory also allots a limited amount of space for shopkeeper storage and sale space. For example, the Tinker begins with one hundred 'inventory slots' to store his purchases, and twenty 'shop slots' for the items shown to customers at any given time. LIS Shopkeepers have an AI setting that controls how they sort inventory - the Tinker, for his part, tends to list the least-recently-acquired items first so as to help move his inventory faster.
There is also a Global Living Inventory, which is used to stockpile items with which to repopulate store inventories that have grown stale or become unused by PCs. The Global Living Inventory can hold up to ten times the amount of the largest available store, and also uses timers; when an item 'times out' of a store's Living Inventory, there is a chance that it will instead wind up in the Global Living Inventory. In turn, if something times out of a store's Living Inventory and there are less items left in the Inventory than can fit in the storefront, a random item from the Global Living Inventory may be sold to the shopkeeper to fill that gap.