I heard from a friend Amazon dolling out tons of cash to their team of PhDs so they can design automated pricing for certain customers
Second that.
Artificial intelligence, algorithmic pricing, and collusion
31–40 of 57 posts
Re: Artificial intelligence, algorithmic pricing, and collusion
#32Re: Artificial intelligence, algorithmic pricing, and collusion
#33Earlier quoted context omitted.
Different people can have different versions of the word “collusion” but the important definition is that in the law, and in most countries it does not require an explicit agreement between parties.
I’m not aware of any definition of the word collusion, legal or otherwise, that doesn’t require an agreement between parties. I can’t see how you can have collusion without colluding.
'Tacit collusion' is a real concept; as far as I can tell (as very much a non-expert) it is legal in the US, but there's some ambiguity in the EU.
This (paywalled unless you have academic access) journal article looks very relevant: https://academic.oup.com/jeclap/advance-article-abstract/doi..., and there's a blog post by the author here: https://www.law.ox.ac.uk/business-law-blog/blog/2019/02/tack...
Re: Artificial intelligence, algorithmic pricing, and collusion
#34I think we are there for some of the lower demand products even though it's not collusion in the strictest sense.
If an algorithm's goal is to match a competitor's price then it's not possible to find a better price for any item.
In theory, those item's prices don't move constantly, therefore, all prices will be the same across the board. As a vendor, all I have to do is hike my product's price and wait for all the competitors to match it and then hike it again. If I'm a large vendor like Amazon then it's only a matter of time until I can sell a product at my designated profit without worrying that a competitor will beat me.
A smaller vendor has no incentive to lower the price since it knows that Amazon can always win the pricing war so they compete on service or other ways.
Before algorithms and the net, this was not feasible on lower priced items so vendors had to set prices independently. Now, it's easy to just match your competitor no matter the price of the item.
It's not a conspiracy by definition but it has the same ultimate result of algorithms rasing prices.
Re: Artificial intelligence, algorithmic pricing, and collusion
#35Side not: Is it illegal for independent contractors to collude on freelance platforms like Fever?
Or could this be considered a trade union?
Re: Artificial intelligence, algorithmic pricing, and collusion
#36Dynamic pricing developer here. The bigger problem than collusion is the arms race between higher margins and higher ad costs. In the end Facebook and Google will take almost all the margin as consumers see prices rise until they receive zero net value from their purchases.
Is there any published evidence that Goggle and Facebrick ads are actually effective? Genuine question.
I don't know anybody who clicks them or takes any notice at all of them but maybe these people exist. I don't know of any company that is wholly reliant on some kind of advertising who uses them. Eg Chanel, Coca Cola etc. I do see a bunch of goog/face advertisements on tv and posters at bus stops where I do also see coke ads.
I don't know of any companies and products who road the early google advert trend to prominence. Do they exist?
My strong suspicion is that the ad industry is drowning in BS and always has been. Data cuts through that so I'd love to see anything that anyone has. Maybe it's not all a giant mountain of con?
Re: Artificial intelligence, algorithmic pricing, and collusion
#37It does not even have to be AI. If there is an area where the bulk of humans contact a single agency to decide their prices for them and that agency then tells every caller the same price (adjusted for quality differences), then you will get this style of collusion. The agency can merely claim it is doing research on competitors to set prices, which is almost true since it looks at the prices it has told others to ch…
Also what is happening with wages. Companies relying sharing their wage data with each other through in organizations like Options Impact, and effectively colluding to match each others’ comp.
> Companies relying sharing their wage data with each other
If the collusion was only accidental, then an enterprising company could _just_ increase their price a tiny bit, and attract better people than their competitors.
Re: Artificial intelligence, algorithmic pricing, and collusion
#38This is fine.
Re: Artificial intelligence, algorithmic pricing, and collusion
#39For the sake of a more informed discussion, here is a copy of the actual paper: https://a.qoid.us/SSRN-id3310310.pdf (Couldn’t find it on Sci-Hub, so I paid $5 for it.) Edit: in particular, it addresses a question I had after seeing the original article and graph… or tries to: > On the face of it, one may wonder whether the algorithms are effectively punishing the deviation, or whether instead the price cuts simply se…
This. Is how an informed discussion should be. Based on original references and nuanced positions. For hyperboles, we always have the mainstream media :)
Re: Artificial intelligence, algorithmic pricing, and collusion
#40This reminds me of the "Tit for Tat" results of simulations of the prisoners' dilemma[1][2], where cooperating strategies won over competing ones. It also reminds me of Colossus: The Forbin Project [3], a science-fiction movie from 1970 in which a supercomputer in the US and one in the Soviet Union learn to communicate with one another in ways incomprehensible to their human creators and together rule the Earth. [1]…
And that observation makes the article doubly weird: 1) Nobody needs an AI to figure out Tit-for-Tat is a good strategy. It isn't complicated. 2) The technical economic term for this collusion is probably something like 'efficient market price', where the sellers have agreed on what the fair price is to offer their service. Collusion can't mean that the sellers all have an implicitly coordinated price, because the ma…
Most coordinated equilibria results depend on facing the same competitors repeatedly - partly to learn an equilibrium that is influenced by each player's private preferences, and partly because repeated play introduces consequences for defecting from that equilibrium. The more you expect to see the same opponents again, the more you have to gain for colluding, and the more you have to lose from defecting.
So, the most interesting aspect of AI pricing might not be the AI - humans could probably learn to collude with the same setup. It's the fact that AI enables orders of magnitude more pricing decisions, so bots spend less time discovering or defecting from equilibrium, and more time sharing maximum collective profit from customers.