Via Fallows, UC Berkeley biologist Michael Eisen watched a used book price war between two bots that ended...oddly:
Once a day profnath set their price to be 0.9983 times bordeebook’s price. The prices would remain close for several hours, until bordeebook “noticed” profnath’s change and elevated their price to 1.270589 times profnath’s higher price. The pattern continued perfectly for the next week.
But two questions remained. Why were they doing this, and how long would it go on before they noticed? As I amusedly watched the price rise every day, I learned that Amazon retailers are increasingly using algorithmic pricing (something Amazon itself does on a large scale), with a number of companies offering pricing algorithms/services to retailers. Both profnath and bordeebook were clearly using automatic pricing – employing algorithms that didn’t have a built-in sanity check on the prices they produced. But the two retailers were clearly employing different strategies.
What’s fascinating about all this is both the seemingly endless possibilities for both chaos and mischief. It seems impossible that we stumbled onto the only example of this kind of upward pricing spiral – all it took were two sellers adjusting their prices in response to each other by factors whose products were greater than 1.
When Eisen published his blog entry the book had dropped to $106—or $135 through bordeebook. Just now, though, bordeebook has it for $977, and profnath seems not to have it any more. I wonder what happened there.