[HN Gopher] The game theory of how algorithms can drive up prices
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The game theory of how algorithms can drive up prices
Author : isaacfrond
Score : 170 points
Date : 2025-10-23 11:38 UTC (11 hours ago)
(HTM) web link (www.quantamagazine.org)
(TXT) w3m dump (www.quantamagazine.org)
| steve_gh wrote:
| Very interesting. I looked at stability in learning agents in
| artificial markets back in the late 90s for my PhD and concluded
| that at least the systems I worked with weren't stable - they
| were prone to bubbles and crashes.
|
| Very interesting to see that there is a class of stable systems
| that force high prices.
|
| Would be interesting to understand if the no swap regret systems
| studied also give stable results when it is an N player game
| rather than a 2 player game
| kalinkochnev wrote:
| That sounds actually really cool. Do you have a link to any of
| your papers?
| derbOac wrote:
| I had the same question about N-player settings. My intuition
| is the more players, the more competition and the more chaotic
| the dynamics, and the harder it would be for any strategy like
| they describe to emerge. But intuitions can be wrong.
|
| In any event, it would be interesting to know how the dynamics
| change with increases in the number of players -- I wondered if
| it might provide some kind of rationale for having a certain
| number of competitors in a market.
| Etheryte wrote:
| Intuitively, stability might also be easier to achieve here
| since there is a human check in the loop, oftentimes someone
| with considerable experience and knowledge of the current
| market state.
| pixl97 wrote:
| I mean we are in the age of digital pricing, even on the shelf.
| Modern price collusion is more apt to happen with A/B testing if
| prices at locations to see what the local market will bear.
|
| I've seen Walmart do this in the past. Items that were not on
| sale could have significant differences in price, where in
| general the prices in more affluent areas are higher. We're
| talking 50 to 75 cents on common items, but sporting goods quite
| often had a different of 3 to 5 dollars.
| PaulKeeble wrote:
| You can see this happening all the time on Amazon these days if
| you use a price tracker. Most items are swapping between two
| prices that are maintained for periods and little peaks just a
| little bit lower and higher to test response. Then when you
| take that and look across different countries stores you can
| see they are running different pricing and running tests
| globally while the price is being sustained in others.
|
| Enormous amounts of price testing with a very clear strategy
| that is easy to see in pricing charts.
| lotsofpulp wrote:
| Having a single flat price is/was due to labor prices being
| high enough in the developed world to ignore potential
| profits from price discrimination.
|
| When my grandparents went to the market in the developing
| country they immigrated from, they would bargain for
| everything, and every customer got a different price.
|
| The developed world was rich enough that grocery stores
| didn't need to waste time doing this, and could simply price
| high enough to earn a consistent profit margin and expect
| consistent sales. They did engage in price discrimination via
| coupons. Just not individually, until smartphones and apps
| came along.
|
| Now that automation can handle a lot of the price
| discrimination, expect more of it, everywhere.
| kaitai wrote:
| It is not only about labor prices being high enough
| (creating consumers who can buy more). There is a
| significant religious component to the introduction of
| fixed pricing. Quakers are often credited with introducing
| fixed pricing in the Western world, because they felt that
| charging higher prices to those less able to haggle (or
| higher prices by age, gender, race) was immoral, dishonest
| in the eyes of God. They then experienced greater sales
| because you could send your kid to the store and trust the
| kid wouldn't get ripped off. It just took a layer of stress
| off going to the store. John Wanamaker (a Presbyterian?) I
| think is the one who really started a retail empire on
| fixed pricing. One of his main selling points was one price
| for anyone, and a fair return policy.
|
| The behavioral economics here is that many people will pay
| a consistent (fair) price to not be surprised and not feel
| ripped off.
|
| Agree that automation will engage in price discrimination
| whenever possible. When will we see the backlash? I have
| heard stories of outrage ("when I looked for airline
| tickets at work they were way cheaper than when I looked on
| my home laptop!") but we haven't seen a widespread
| reaction, and the moral aspect seems to be relatively
| overlooked at this time.
| lotsofpulp wrote:
| Labor and land prices in more affluent areas will be higher, so
| it is expected COGS will be higher.
|
| However, Walmart now displays in store and online for pickup
| prices on their website. I walked into the Walmart and paid
| $1.11 more than if I were to have ordered it via the app on my
| phone or website for pickup.
|
| And Walmart was very upfront about it, and I knowingly paid
| $1.11 more because their online order and pickup option
| sometimes makes you wait 20min+ for a Walmart employee to come
| out and give you what you bought (even after it says your order
| is ready for pickup).
| photonthug wrote:
| > Modern price collusion is more apt to happen with A/B testing
| if prices at locations to see what the local market will bear.
|
| One of my first thoughts as well. If you're big enough, you
| collect so much data and run so many experiments all the time
| that you know exactly what you'd do if/when there's any
| competitor on the scene. Not only is there no need to talk to
| them and make backroom deals, but barely any need to even
| observe them. You priced like they did/would/could at some
| point already anyway. At a certain scale and if you already
| know the price that the market can tolerate.. the most relevant
| hidden information you want to know is how much cash your
| competitor has access to. That tells you whether you can win
| the price-war to sell at a loss for long enough to ruin them,
| buy them, move on to integrating verticals etc.
|
| Game theory is interesting but also a bad model to the extent
| that it assumes persistent players with changing strategies,
| whereas average case in late-stage capitalism is more likely to
| have players eating players, no new players can enter, players
| changing rules, etc. As a CS nerd I still like a game
| theoretical approach better than most econ, but at some point
| we need to give up on tidy formulas and closed-form answers,
| and go all in on messy simulations.
| RataNova wrote:
| Yeah, dynamic pricing isn't just for airlines anymore, it's
| quietly baked into everyday retail, and most don't even notice
| doctorpangloss wrote:
| I don't know. Surely the biggest impact on Amazon's prices,
| for example, is that it is disguising a $7 shipping cost
| inside the $0.10 items that are priced for $8? Or disguising
| $100 of prepaid shipping as a "Prime" membership?
| nomilk wrote:
| The researcher says
|
| > this strange strategy will maximize your profit. "To me, it was
| a complete surprise"
|
| It doesn't seem like such a surprise that algorithms that use
| information about rivals to optimising profit tend to price high.
|
| Consider a small town with two gas stations, you own one. You can
| set the price (high or low) in the morning and can't change it
| until the next day. Your goal is to optimise profit for the next
| 1000 days. On day one you price high (hoping your rival will).
| But your rival prices low and wins lots of business. On day two,
| you price high again (hoping your rival will have seen your
| prices and cooperate). If your rival prices high, you both stay
| high for the most of the next 998 days (there's some incentive to
| 'cheat' and price low, but that is easily countered by the rival
| pricing low). If your rival priced low on day 2, you have to
| start pricing low too. But _occasionally_ you 'll price high to
| try to 'nudge' your rival to price high to avoid low-low. If they
| eventually understand, you can both price high for the rest of
| the 1000 days. Critically, even if stuck at the low-low
| equilibrium, you'll keep trying to 'nudge' high periodically. The
| frequency with which you try to 'nudge' will depend on the ratio
| of profit for high-high vs low-low. If you both make extreme
| profits when pricing high-high, you have more incentive to
| 'nudge', but if the difference isn't great, you won't nudge as
| often.
|
| Seems obvious pricing high will be attempted in proportion to the
| reward relative to pricing low.
|
| The researchers' conclusion seems reasonable:
|
| > it's very hard for a regulator to come in and say, 'These
| prices feel wrong'"
|
| and
|
| > what can regulators do? Roth admits he doesn't have an answer.
|
| (i.e. in practical terms, there's no way regulators can police
| what algorithms sellers use - I can't think of exceptions to
| this, but perhaps there are some special cases)
| hrimfaxi wrote:
| > (i.e. in practical terms, there's no way regulators can
| police what algorithms sellers use - I can't think of
| exceptions to this, but perhaps there are some special cases)
|
| Regulators can already police the data used as inputs in
| decision-making in industries like insurance, so policing the
| algorithms that operate on that data doesn't seem like too much
| of a reach.
| nomilk wrote:
| > Regulators can already police the data used as inputs in
| decision-making in industries like insurance
|
| How enforceable is policing which data can be used as inputs
| though?
|
| It's common for insurance companies to price based on age and
| sex (e.g. teenage boys will typically pay higher car
| insurance premiums than similar aged girls). Presumably
| insurers are not allowed to price on a factor such as race.
| Unlike collusion, overt use of a variable like 'race' in a
| pricing model could be detected and enforced via a company
| whistleblower.
|
| But how would a regulator find/prove algorithmic collusion?
|
| In an extreme case, regulators could ban all use of
| competitors' data in a sellers' pricing models. But that
| seems extreme and unproductive since it could stop price wars
| (downward prices), as well as muting good effects of the
| 'invisible hand' (higher prices attracting more market
| entrants and greater investment)
| hrimfaxi wrote:
| > But how would a regulator find/prove algorithmic
| collusion?
|
| They don't need to. At least in the US, courts look at the
| outcome and if the outcome is discriminatory that's the
| important part. This is under the idea of disparate impact.
| Beyond that, the realpage cases offer an example of modern
| day prosecution of algorithmic collusion.
| photonthug wrote:
| Seems like an optimistic read on things. This is the kind
| of common-sense approach you would expect in a world
| without lawyers, just observing that collusion is bad
| because the effects are bad, and digging into the details
| of the causes are completely irrelevant for the
| public/plaintiff because it's really just on the company
| to fix the undesirable result.
|
| IANAL but if realpages outcomes were definitive or
| reasonably generalized results dealing with the core
| issue, then similar arguments against e.g. Amazon would
| be a slam dunk. AFAIK, actual case outcome just hinges on
| details about "nonpublic data" and similar. Not remotely
| on bad effects for consumers or anything like that. Since
| printing realpages database in the newspaper would not
| actually help apartment-hunters, then this just tells
| landlords and third party markets how to do price-fixing
| legally next time? Most likely algorithmic pricing,
| surveillance pricing, etc is still coming to your grocery
| store after the issue is "settled" for property rental,
| or at least settled for realpages, in certain
| jurisdictions, for now.
| skeezyjefferson wrote:
| > AFAIK, actual case outcome just hinges on details about
| "nonpublic data" and similar.
|
| that sounds like insider trading. price fixing would need
| not involve nonpublic information (beyond the actual
| conspiracy to fix the prices as it helps to keep that
| part secret normally)
| photonthug wrote:
| > "Settling Defendants have agreed not to provide
| nonpublic data to RealPage for use in competitor pricing
| recommendations and to refrain from using RealPage's RMS
| that relies on non-public competitor data to make pricing
| recommendations," attorneys wrote in the settlement
| filing.
|
| https://www.multifamilydive.com/news/realpage-class-
| action-l...
|
| I agree that "nonpublic" is barely related to the problem
| so how it's related to a solution is unclear. But it
| seems like this is the only general aspect of the
| outcome. Otherwise the outcome is just to stop doing this
| specific bad thing this specific time, and fines that are
| less than the profit made from bad behaviour.
| bfkwlfkjf wrote:
| > what can regulators do?
|
| Regulators could say "you're not allowed to make more than X
| profit". They already do that with utilities, so it's not a
| matter of practical impossibility.
| cwmma wrote:
| The problem with this is it ends up being a signal in of
| itself, so when you say, the cap is X you end up having
| everyone immediately set their profits to X and never budge
| from there
| pessimizer wrote:
| I continue to believe that in the case of oversized margins,
| the government should just enter the market themselves. Buy
| the smallest competitor and operate it at a reasonable
| margin, growing it at every opportunity. If the rest of the
| market lowers their margins to beat it, spin the thing off.
|
| Basically don't bother to dictate margins, just declare that
| market a failure.
| vladms wrote:
| Regulators could ensure that detailed financial data of
| companies is public. If everybody understands how much profit
| and opportunities are in a certain thing that will encourage
| other people to do the same thing.
|
| I always think that in this day and age financial secrecy
| benefits mostly the richest people and adds to the
| informational imbalance (which does not help even the model of
| free markets).
| ElevenLathe wrote:
| I agree, but its much more complex than just forcing
| companies' books to be open to the public. There are all
| kinds of accounting tricks you can pull with complex
| constellations of "entities" (the jargon used by tax dodge
| experts for the fake companies they set up). IMO we have to
| retreat away from a world where anyone with a couple hundred
| dollars can create a corporation by filing a form. Corporate
| personhood should be a privilege that is granted specifically
| by a democratically-elected government for well-delineated
| purposes and subject to revocation if the public trust is
| betrayed. This in turn obviously means that we need to
| establish (or re-establish, in places) democratic control of
| the government and, unless we do this all at once everywhere
| (very tricky) also massively reduce the amount of cross-
| border capital flows to the point where they can be
| reasonably understood and regulated by these domestic
| democratic governments.
|
| All of this is a tall order, but there's no shortcut to
| establishing, re-establishing, or maintaining a democracy.
| vladms wrote:
| I think the idea of financial transparency should be more
| discussed at any level. Yes, there will be loopholes, but
| now the default is "money is secret, how dare you!".
|
| I would claim that democracy was an ideal at any point in
| time. Most people have/had insufficient education to
| understand all the topics. Even in more advanced countries
| (with better education on average) the discourse gets
| focused on petty issues. The societies that will be able to
| focus on the longer term will be the next centuries
| winners!
| ElevenLathe wrote:
| To be clear: I agree. There is no reason that citizens
| shouldn't be able to inspect every document produced by
| their government, listen to any conversation about any
| topic that involves any officials, and no reason not to
| extend this regime into the so-called "private sector",
| which is -- legally and historically -- a creation of the
| state, not the other way around.
|
| If you don't like that intrusion into your finances, you
| are still free to do business using your own personhood,
| but the public won't provide you with a spare disposable
| one.
| MangoToupe wrote:
| > (i.e. in practical terms, there's no way regulators can
| police what algorithms sellers use - I can't think of
| exceptions to this, but perhaps there are some special cases)
|
| One obvious answer would be to introduce a publicly-owned,
| zero-margin competitor not constrained by this algorithm, thus
| reintroducing an incentive to drive down costs or drive up
| quality.
| sharemywin wrote:
| that doesn't even consider the buying the competitor across the
| street and paying lobbyist to have congress ignore you for the
| benefit of the consumer because with the combined stores you
| can gain market efficiencies. of course ignore the price
| gouging that actually happens.
| RataNova wrote:
| What's interesting is that the surprise seems less about the
| behavior itself and more about how minimal the assumptions were
| Workaccount2 wrote:
| This example works well in a vacuum, but not much else. You
| would see people filling up outside the small town, or see a
| third station open up to undercut the other two. Or, there is
| so much overhead that the high-high price is actually the fair
| price. Like grocery store monopolies that are bilking people so
| they can reap....1-2% profit margins.
| friendzis wrote:
| > Imagine a town with two widget merchants. Customers prefer
| cheaper widgets, so the merchants must compete to set the lowest
| price.
|
| I always found this statement to be rather wishful. Individual
| lowering of prices makes sense if and only if your competitor is
| capable of saturating the market. Otherwise, demand elasticity
| becomes very relevant. Sure, your competitor may take the larger
| share of the market, but then you can compensate with higher per
| item profit.
|
| The common wisdom is that in properly functional markets there's
| enough supply with n-1 market participants, therefore given a
| market signal of one participant lowering their prices the last
| one standing without lowering prices gets kicked out of the
| market, making maintaining prices the losing move. Yet, if the
| rest of the market does not react to the signal, the one lowering
| their prices hurts their profits and possibly kicks themselves
| out of the market. Making price maintenance, and depending on
| elasticity maybe even jacking of prices, the winning move in the
| presence of this signal.
|
| Turns out the probability of either move being the winning move
| is dependent on probability of other market participants
| colluding/defecting. However, since lowering the prices hurts the
| profit a rational market participant would conclude that the rest
| of the market is inclined, even if a little bit, not to lower
| their prices in reaction given price cutting signal and similarly
| a bit more inclined to raise the prices given price hike signal.
| lotsofpulp wrote:
| > I always found this statement to be rather wishful.
| Individual lowering of prices makes sense if and only if your
| competitor is capable of saturating the market.
|
| Like Walmart/Dollar Tree/Costco/Aldi/Target/Kroger/Amazon etc
| can (and have)?
|
| And on a macro scale, like China can (and has)?
| guywithahat wrote:
| If anything it's incredible how competitive the market is.
| You can go into walmart, in the richest large country on
| earth by a significant margin, and buy pants for like $20.
| There are some heavily regulated industries where maybe we
| don't want this but in general companies competing to drive
| down prices is how most things work, and it works
| unbelievably well.
| wordpad wrote:
| This feels like a variation of prisoners dilemma.
|
| I think what you say is true for well established markets. In
| growing markets the incentive to capture market share may well
| override any profit considerations.
| LPisGood wrote:
| TFA is about game theory and the prisoner's dilemma is one of
| the most basic examples of game theory, so this makes sense.
| dghlsakjg wrote:
| It is an intentional oversimplification.
|
| Although a good proxy for the situation in the real world is
| gas stations, as long as you ignore that gas stations tend not
| to make much, if any, profit on gas sales.
| wat10000 wrote:
| No need to ignore it. This is exactly why gas stations tend
| not to make much profit on gas.
|
| In my area, there's one notorious gas station that's a couple
| miles away from any other commerce but has a reasonably large
| amount of traffic passing by. Amazingly, its prices are
| always about 50% higher than everywhere else.
|
| Competition works when it exists. Yes, you also have to
| factor in supply. That's why the phrase is "supply and
| demand."
| spwa4 wrote:
| You want to get an economist to shut up? Point out that we're
| now in a situation that for nearly any physical good, one
| producer _is_ able to saturate the market, that nearly every
| factory is operating below capacity, that individual farms are
| so big they can easily produce what an entire state needs and
| in fact operates below capacity for financial reasons. Both
| factories and farms: A LOT below capacity. Because 1% of a
| modern factory 's capacity is able to saturate a very large
| local market, and the rest depends on international treaties,
| not on supply, demand, or even price.
|
| Which means increasing supply for just about anything ...
| doesn't actually change price, and in fact the issue you're
| pointing out is not just one of the influences on prices, but
| almost the only one.
|
| The market is saturated and producers have no incentive to
| lower prices, for nearly every good. Which means increasing
| supply ... does not lower prices. Increasing demand does not
| raise prices ... that's just not how it works anymore.
|
| The only influence on price is international relations, or to
| put it more bluntly: various kinds of taxes are the only
| influence on prices (going from import/export tax, vat/sales
| tax, subsidies, raw material availability (effectively mostly
| meaning a tax in the form of export restrictions), what loan
| conditions are for good X, ...), and so economics just doesn't
| really apply anymore to the vast majority of goods.
|
| The price of widgets from water balloons to air fryers is
| controlled by government subsidies in particular countries.
|
| The price of houses is controlled by mortgage conditions, which
| are set in law. Meaning they are different between countries in
| both ways that matter (so, for example, Freehold vs Leasehold,
| Australia's Negative Gearing, whether 30 year fixed price is
| available, immigration policy, whether foreign investment is
| allowed ...) and in weird ways that don't matter. Supply and
| demand don't control price.
|
| The price of labor and services is around 80% tax in most of
| Europe. Measured by taking $100 that the employer pays to have
| labour done, so including for example France's "patronal" tax,
| compared to what the employer would receive and not have to pay
| to the government in his bank account if the employee chose to
| spend all of his pay on whatever his labor produces. Yes there
| is still some supply/demand here ... but not much.
|
| The problem is that for nearly everything "taxes" (as in taxes
| and tax-like regulations) determine who produces, and the tax
| swings are so large (going from -10%, yes minus, to 80% and
| more) depending on location and good, and their effect swamps
| any economic concern in nearly all sectors of the economy.
| wat10000 wrote:
| Food in developed nations is incredibly cheap as a direct
| result of the massive productive capacity of modern
| agriculture. Factory goods are also very cheap. Increasing
| supply demonstrably drives prices down.
|
| Housing is an area where supply is heavily restricted,
| partially because land cannot be manufactured, partly because
| of government regulations controlling what can be built and
| where. Surprise, housing is very expensive.
| spwa4 wrote:
| And yet, if you check it out for real, you'll find most
| food could be a _lot_ cheaper (some countries have
| regulations for basic foods to be excepted from most
| regulation and taxes, and there 's a large price
| difference)
|
| Especially meat could be a great deal cheaper if these
| countries wanted to make that happen.
|
| Food in the west is only cheap in one sense of the word,
| and even then if you compare how much of the cheapest bread
| today you can buy for the average monthly pay today versus
| how much of the cheapest bread in 2000 you could buy for
| the average monthly pay in 2000 it's almost a factor 2
| less.
|
| But yeah, that's still very cheap: nobody's going hungry at
| the increased prices.
| wat10000 wrote:
| Agricultural productive capacity hasn't changed that much
| in the past 25 years. Looking at the longer term, food
| prices have dropped enormously. At the beginning of the
| 20th century, the average American household budget was
| 40+% food. Today it's around 10%.
| hn-reader-2 wrote:
| >the average American household budget was 40+% food.
| Today it's around 10%.
|
| Does that mean food prices have dropped enormously or
| could it be that families have to spend more money on eg.
| rent, gas, and health? Adjusting for inflation, the price
| of milk have only decreased 1.1%[1]
|
| [1] https://www.usinflationcalculator.com/inflation/milk-
| prices-...
| wat10000 wrote:
| Your link only shows back to 1995, whereas the figures
| you quoted are about 1901. Even using your link and 1995,
| milk prices dropped 15% over that period, not 1.1%.
|
| If we look at 1901, milk was around 6 cents per quart
| according to
| https://fraser.stlouisfed.org/title/bulletin-united-
| states-b.... Adjusted for inflation, that's about
| $2.29/quart today, or $9.16/gallon. That's over twice
| what I pay and over twice the average according to
| https://fred.stlouisfed.org/series/APU0000709112.
| hn-reader-2 wrote:
| Yes of course you can buy cheap and bad quality milk but
| you should strive to buy good product. Same goes for
| meat. If you do not invest in yourself then you are
| wasting money
| amelius wrote:
| > I always found this statement to be rather wishful.
|
| The principles behind the free market are flawed. Copyright and
| patents are flawed. We're being played. But somehow the
| incumbents always get away with "but we have fair rules", when
| everybody who has ever entered a game of monopoly late knows
| this is not true.
| shafoshaf wrote:
| Not flawed, but very, very complicated. The theory of free
| markets holds a lot of very well reasoned and tested lessons
| that can be instructive, depending to which principles you
| are referring.
|
| Newtonian principles does a really good job for a huge number
| of use cases, but it isn't the end all.
|
| When it comes to intertwining human taste, a doctrine of
| equal opportunity combined with private property, and scarce
| resources, I don't want to throw the baby out with the
| bathwater.
| Retric wrote:
| Free markets as described by Econ 101 don't apply in any
| sector where advertising is useful.
|
| Far more complicated theories get much closer to reality,
| but aren't nearly as well known outside of economic
| circles.
| nerdponx wrote:
| The irony is that rental markets are probably one of the
| better markets to apply Econ 101 principles. Yes you have
| problems with information asymmetry, but for the most
| part you have a huge number of relatively small buyers
| and sellers, and prices freely ebb and flow based on
| supply and demand conditions. So if you are going to
| analyze the effect of algorithmic pricing in the real
| estate market, starting with the simple free market
| assumptions actually is not a bad idea at all.
|
| It's also common practice to show the effect of something
| on an idealized free market, with the idea of being that
| _even under supposedly ideal conditions_ , the something
| being analyzed is still problematic.
| cogman10 wrote:
| It works for single family homes, but it breaks down when
| you start talking about multi-tenant facilities.
|
| There are far fewer single family homes on the market and
| they are a lot harder to bring up in the market. However,
| multi-tenant facilities cost a lot less to bring to
| market but there are few owners of those buildings.
|
| With a much smaller set of unit owners, it makes
| collusion a lot easier to pull off. Only a few facilities
| need to participate in order to raise the prices and once
| it goes up for the large owners the smaller owners will
| happily raise their prices because "it's competitive with
| market rates".
|
| The part that's totally divorced is that the cost of
| these units has nothing to do with business expenses and
| everything to do with market availability. A new player
| can't really come in and disrupt things and even if one
| or a few actors start undercutting the others it doesn't
| matter because they only have so many units they can sell
| which will fill up quickly.
|
| The whole thing has driven up housing prices to the
| extreme. My 15 year old home is worth 5x the price I
| purchased it at. That actually scares me. I couldn't
| afford my home today and I can't afford to really move
| into a nicer home in the future.
| parineum wrote:
| The closet they actually come to existing is in black
| markets because regulations exist.
| IAmBroom wrote:
| Your typo actually works in context.
| godelski wrote:
| > Free markets as described by Econ 101 don't apply.
|
| FTFY
|
| They don't apply anywhere. It's a 101 class. It's over
| simplified. It looks accurate enough but a first order
| approximation isn't enough to operate effectively in the
| real world. It's like thinking you can code if you're
| able to read psuedocode. It's a great outline, but
| there's a lot of little things in between that ends up
| being >90% of the lines of code you need to make a
| working program
| babush wrote:
| Can gravity buy out magnetism?
| walkabout wrote:
| It's also the case that market-ideals tend to become
| miserable to experience in practice if you approach them
| too closely.
|
| Usually the discussion of that kind of thing revolves
| around the near-elimination of profit via (hypothetical)
| too-perfect competition among producers and too-perfect
| information for consumers, but with the rise of automated
| mass-scale spying and automated finer-grained price
| discrimination (plus enormous consolidation of markets due
| to near-abandonment of anti-trust enforcement in the '70s),
| we're kinda seeing the real deal play out the other
| direction: approaching-maximum extraction of profit from
| every transaction.
|
| Which sucks, to put it mildly. You _do not_ want markets
| that function "too well" in any direction.
| Fernicia wrote:
| > The principles behind the free market are flawed
|
| Can you go into specifics?
| friendzis wrote:
| The so called "free market" (not to be confused with
| laissez faire) assumes perfect "information symmetry" and
| perfectly rational market participants, which is,
| effectively, impossible in this particular reality, and
| concerns itself mostly with marginal eventual state. It is
| a model.
|
| E.g. the model "use VC money to subsidize cost until all
| competitors are bankrupt then hike prices to recoup" is not
| really reflected in this "free market"
| amelius wrote:
| Yes, there is nothing wrong with working hard and making
| money. But if you use that money against the rest of us,
| then we have a problem. Making a huge pile of money to
| corner a market is one of those scenarios, but there are
| many.
| Fernicia wrote:
| > use VC money to subsidize cost until all competitors
| are bankrupt then hike prices to recoup
|
| Can you give some examples of this happening in real
| life?
|
| None of the examples I can think of where people
| criticised the companies for operating unprofitably, such
| as Amazon retail or Uber, were able to corner their
| markets.
|
| Harvey Normans, Targets, Argos's, Walmarts, all still
| exist and compete with Amazon retail. Most towns still
| operate normal taxis services, Lyft, FreeNow, Bolt, all
| compete with Uber.
|
| VC funding subsidising pricing, albeit temporarily, is
| still good for consumers. It doesn't seem to imply higher
| eventual prices. The opposite seems true, in fact.
| amelius wrote:
| Just look at how hotel owners despise Booking.com.
| fzeroracer wrote:
| > Can you give some examples of this happening in real
| life?
|
| Austin had a local rideshare app that entered the scene
| when Uber/Lyft left the area because the city passed a
| law it failed to propagandize against called RideAustin.
| Non-profit, worked really well and paid well. When Uber
| and Lyft came back, they heavily subsidized the cost of
| doing business in Austin by both arbitrarily lowering
| prices and heavily juicing rewards for drivers.
| Conveniently, when RideAustin shut down because most
| drivers and riders had moved onto either app, these
| rewards started getting clawed back and prices went way
| back up.
| indoordin0saur wrote:
| > Copyright and patents are flawed... the incumbents always
| get away with "but we have fair rules"
|
| You're right, but I'd add that important thing here is that
| this is _not_ a free market.
| zaphar wrote:
| You shouldn't lower prices as a direct reaction to your
| competitor. You should lower prices as a reaction to your
| customers willingness to buy at a given price. It's an indirect
| reaction but it factors in the actual market.
| positron26 wrote:
| This is still so oversimplified. There's always bellwether
| products customers buy a lot and get used to. They use those
| to decide if you are cheap or expensive. Costco hotdogs are
| about satisfaction. If I can get one good deal or even a
| great deal that I find every time, I'm much more likely to be
| satisfied.
| BizarroLand wrote:
| I was just thinking about this. Costco either loses money
| on or just barely breaks even on their hotdogs, but they
| keep selling them at $1.50. It's a part of their brand.
|
| It would be smarter for them to raise the price of their
| membership another $10/yr to offset the losses than it
| would to raise the price of their hot dogs another $0.50 to
| make them profitable.
| dghlsakjg wrote:
| Don't know if it had anything to do with the price of
| hotdogs, but Costco did just increase their membership
| prices.
|
| https://customerservice.costco.com/app/answers/answer_vie
| w/a...
| Workaccount2 wrote:
| I wouldn't be surprised if costco writes off the loss on
| hot dogs as a marketing expense.
| shmatt wrote:
| This actually works well the other way around.
|
| When sales are still growing YoY (like the post covid
| market), but prices are up 30% or 40%, you understand your
| customer is still willing to pay the higher price
|
| Its similar to a McDonalds or Starbucks situation where you
| just keep increasing prices dramatically until you get a
| first quarter of lower than expected sales, then you start
| adapting downwards
|
| Most corporations still haven't hit that limit, see streaming
| companies increasing prices every few months, they still
| haven't hit the point where profits decrease YoY. When they
| do the streaming prices start decreasing
| Arwill wrote:
| >see streaming companies increasing prices every few months
| They can do that because they are practically monopolies.
| Workaccount2 wrote:
| They can do it because people are hopelessly addicted to
| screens.
|
| You won't die if you stop watching Netflix. We aren't
| talking food or medicine here. In fact your life would
| probably improve. But addiction is a real animal.
| hollerith wrote:
| I wish there were some term other than addiction here:
| addicts routinely steal from friends and family to feed
| their addiction; addicts who are parents sometimes
| threaten to stop allowing their children to visit with a
| grandparent unless the grandparent helps the addict pay
| for the addiction; drug addicts living in violent
| neighborhoods sometimes agree to murder somebody in
| exchange for drugs.
|
| Screen addicts almost never stoop that low and the ones
| that do are addicted to a cam girl (e.g., Grant Amato),
| porn or gambling, not Netflix (or social media).
| jellicle wrote:
| > Imagine a town with two widget merchants. Customers prefer
| cheaper widgets, so the merchants must compete to set the
| lowest price.
|
| Imagine a town with two widget merchants. The two go out to
| dinner one night, and next week they both double their prices.
| Both widget merchants are pleased.
| bluGill wrote:
| In the real world there are always things other than price to
| compete on. Business school will tell you constantly that best
| quality is where you want to compete in almost all cases.
| Quality has many different options and so you can compete with
| something that is different from someone else by enough that if
| someone prefers your quality you are the only option.
| ozim wrote:
| That's the fun part of observing influencers.
|
| Let's say there is a dozen of them playing Minecraft, one
| could say they are in the same market competing with each
| other.
|
| But what happens really is some folks like dude with long
| hair, others like the other guy that screams every time he
| wins.
|
| Same with training videos, I bought course from a guy that is
| kind of monotonous and I don't care but my GF cannot stand
| watching the guy for longer than 10 minutes.
|
| Bakeries seem like closest one would be best, but somehow I'd
| rather go 10 mins further because I don't like the feeling of
| the first one. Even though quality or price they don't
| differ.
| mhuffman wrote:
| >Business school will tell you constantly that best quality
| is where you want to compete in almost all cases.
|
| Hmmmm, I don't remember it that way. I remember the constant
| take was to build a moat (typically based on intellectual
| property), then optimize net profit and/or network effects.
| Quality never really came up unless it is so bad as to cause
| lawsuits.
| schmidtleonard wrote:
| Yeah, it's the exact opposite: business school teaches you
| that you should avoid competing on price/quality at all
| costs and all the ways to avoid competition: network
| effects, platform effects, last-mile dynamics, predatory
| pricing, information asymmetry, etc.
|
| Of course, right after teaching you how to exploit all the
| bad incentives created by capitalism they teach you that
| the government is to blame for all bad incentives because
| capitalism only makes good incentives.
| mhuffman wrote:
| lol, yes. In my case the "govt. is the cause of all bad
| incentives and just turbo-fucks the customers/markets
| with laws and regulations" came before all the tools that
| one might use to make profit. Also rent-seeking was
| lionized (eg. event ticket "middle-men" that purchased
| all the tickets and raised the prices) as fundamentally
| necessary to the markets along with strategies like when
| to use "dirty marketing" against opponents and of course
| there where the required ethics courses to round out the
| education.
|
| Interestingly, the claim about competing on price was
| that it would just inevitably lead to everyone lowering
| their price to zero marginal cost, so you should find
| other ways to differentiate yourself or to use IP to sue
| others from not competing.
| godelski wrote:
| You sound like an engineer.
|
| I don't mean it in a bad way. I do think engineers and
| business people should be in contention. But business people
| will sacrifice product (quality) for profit while engineers
| sacrifice profit for product.
|
| Quality is often hard to define too. The business people have
| a harder time defining it as well since they understand at
| best as a user, but only if they are dog fooding (even
| engineers often don't!). They've developed strategies to make
| profit and still be relevant.
| photochemsyn wrote:
| Imagine a town with two landlords who own all rental
| properties. Yes consumers prefer cheaper rentals, but all the
| landlords have to do is write an app that they can use to set
| prices as high as they can while not having too many units
| empty. If the homeless population in the town increases, that's
| an externality - especially if the landlords themselves don't
| live in the town.
| indoordin0saur wrote:
| This works if landlords don't have significantly more units
| than are demanded by the population AND it is both very
| expensive for new units to be built and new competitors to
| enter the market. If enough supply comes on the market and
| the best move for the landlord with the additional supply
| would be to lower prices. Tenants then all move into the
| better value units and the expensive landlord is left with
| either empty buildings or is forced to lower his price.
| sylos wrote:
| Wouldn't that require a large flooding of units not
| attached to those landlords? And considering they already
| cornered the market on the "old" units, unless this market
| disrupting supply of units is owned by someone generous,
| they'll just match the old prices and call it a win.
| denimnerd42 wrote:
| usually prices dont go down. the cost does relative to
| inflation. what usually happens is a new investor will do
| the analysis and build new units that are even more
| expensive but only slightly. now all the current tenants
| that can afford it will leave the current landlords and
| the current landlords wont be able to increase prices
| because there is a better product at that price level.
| indoordin0saur wrote:
| It does depend on where you are and how elastic supply
| is. In Austin for example there has been a recent
| _decrease_ in rent (even relative to inflation) despite
| continually growing demand.
| denimnerd42 wrote:
| austin had such an insane explosion of supply. but they
| also have a price explosion just a couple years ago.
| probably going to see something similar with respect to
| GPU rentals in a couple years
| sharemywin wrote:
| if you've ever shopped at Giant Eagle instead of Kroger you'll
| understand the flaw in the logic.
|
| higher prices usually equals better service, less busy
| shopping. get in and get out.
|
| so if your time is worth more than your money you aren't
| sensitive to price at the widget scale. most widgets are
| bundled with some kind of service.
|
| I bought some printing and it was super cheap but no service
| not an email not a phone number nothing. not ordering from
| their again.
| ajmurmann wrote:
| So the products are not the same
| eitau_1 wrote:
| I find double-action[0] a really useful mental model of market.
|
| [0] https://en.wikipedia.org/wiki/Double_auction#Game-
| theoretic_...
| yieldcrv wrote:
| The idea is that a third, fourth and fifth widget manufacturer
| pops up and undercuts everyone
|
| There are many industries where that doesn't happen, but there
| is also opportunity to make it happen
| crowcroft wrote:
| Not entirely relevant to the article, but another factor that
| is rarely discussed. You need to assume people know about both
| widget companies.
|
| You often see a McDonalds or Wendy's outcompete lower
| price/higher quality alternatives, simply because it's a brand
| people can recall.
| gowld wrote:
| What is lower price than McDonalds or Wendy's for a
| substitutable good
|
| Economy of Scale is powerful.
| cogman10 wrote:
| There's a weird thing happening in the US where all the
| restaurant suppliers have consolidated. What that means is
| you likely won't see competitive prices anywhere else not
| due to scale but due to the input price being fixed
| regardless of who you are.
|
| I believe McDonalds is still somewhat independent in it's
| sourcing. IDK about wendy's. But Burger King is absolutely
| just another Sysco reseller at this point.
|
| That means a lot of the smaller burger stands end up just
| selling the same stuff as every other burger stand. Food
| that tastes a lot like my high school cafeteria did (hint,
| also Sysco).
|
| The only real lever any food business can pull is in
| facilities and staffing. The price of the food is fixed and
| there's no real competition to be had.
| mlsu wrote:
| This is it.
|
| and: true across the board, not just restaurants...
| cogman10 wrote:
| Yup, and I really hate it. Monopolies and oligopolies are
| really terrible in just about every way imaginable.
| Everyone that isn't an oligopoly gets screwed.
|
| This is also simply the natural end state of free market
| capitalism. Every one of these giant businesses knows
| that by swallowing up smaller competitors they can
| ultimately improve their revenue without improving
| quality or actually innovating/competing.
|
| Companies like sysco should have never been allowed to
| merge with other distributors and they should absolutely
| be broken up.
| mlsu wrote:
| it's just incredible.
|
| Internally, these huge corporations behave _exactly the
| same_ as a good old fashioned USSR bureaucracy:
|
| endless meetings where no work gets done
|
| a huge class of bureaucrats (manager, senior manager, VP,
| senior VP, director, senior director ... what's next?
| commissar? secretary?) who don't actually do any of the
| line work and instead exist only to perpetuate a process
|
| huge amount of process that does nothing for the bottom
| line or indeed for anyone at all
|
| random party lines that you must accept or be fired (new
| director came in. Now we're doing a 30 minute velocity
| retrospective every week. you must attend, comrade!)
|
| party language determined from on high, that changes once
| every 5 years (blockchain is our five year plan! huh?
| blockchain? no no, AI is our five year plan!)
|
| party princelings who rise not on merit but purely on
| positional signifiers alone (Comrade, I know you've been
| a party loyalist for 25 years, but your senior director
| position is being given to a new princeling. He's 26
| years old. He came from Stanford, and was on the forbes
| 30 under 30. They say he was a protege of Peter Thiel!)
|
| and, most importantly: everyone at the bottom, who pays
| for all of it, and must take it completely seriously.
| cogman10 wrote:
| It's always wild to me when people talk about the
| efficiency of private industry.
|
| There's not a private business on the planet that's
| super-efficient.
| TimTheTinker wrote:
| The difference is that unlike USSR bureaucracy, these
| corporations' continued operations depend completely on
| the decisions (buy or not) of customers who they cannot
| coerce -- so their feet are far more held to the fire of
| market reality than totalitarian regime leaders. They do
| not have the power to force people _not_ to vote with
| their wallets (not to mention with their feet).
|
| As frustrating and corrupt as our market economy is, the
| oppression under regimes like the USSR and East Germany
| was unimaginably worse.
|
| That being said, yes -- we _badly_ need another round of
| legislative reform like the Sherman Antitrust Act of 1890
| and all the regulatory actions that followed.
| cogman10 wrote:
| > who they cannot coerce
|
| If the market is a consumer need then yeah, these
| companies can coerce simply by being the only (or one of
| a few) options in town. Food, healthcare, and housing are
| all markets that appear to be narrowing which means
| increasing in their coercive abilities.
|
| It's true that the USSR and East Germany were worse, but
| that had a lot more to do with the concentration of power
| into a strongman leader rather than the people. And, in
| fact, a major part of why West germany did so well wasn't
| really due to market forces, but rather due to the US
| spending ungodly amounts of money on rebuilding them (and
| Japan). The USSR was always pretty cash strapped.
| Especially since the only nations they could really
| interact with were nations under the USSR umbrella. Even
| other communist nations like China had pretty tense and
| often not friendly relations with the USSR.
|
| In today's money, we dumped about $120B on West Germany.
| Just to put things in context.
| alostpuppy wrote:
| This is fascinating take and makes SO much sense.
| treis wrote:
| Fortunately it's not true. Sysco has 17% of the market
| according to Morningstar:
|
| https://www.morningstar.com/company-
| reports/1327868-sysco-re...
| cogman10 wrote:
| Sysco isn't the only one, but it is one of the few.
|
| If you start looking at the distribution centers of these
| companies and the competitors, you get a pretty clear
| picture of how concentrated things are.
|
| The drop off for the distribution centers of the top 3 is
| stark. [1]
|
| [1] https://abasto.com/en/advice/food-distributors/
| yndoendo wrote:
| The city I live in has number of locally owned restaurants
| that easily compete against McDonalds and Wendys price
| point. I find the quality of food to be better.
|
| Lack of communication to outsiders and visitors about those
| that compete against such establishments is key. The larger
| organizations have more capital to advertise and help
| capture that economic arena.
|
| Personally, when I travel, I go out of my way to find local
| establishments over large franchises because the former
| slowly siphons out the local economy to some CEO that gets
| paid millions. The latter helps keep the competition local
| economy health. I haven't given Starbucks a penny in over 7
| years and plan to never fund their organization ever again.
| crowcroft wrote:
| I find this less true where I live (New Zealand) where
| there are a lot of small takeaway shops that are often
| competitive on price.
|
| In general though the ease at which the market can recall a
| brand has a direct connection to market share, loyalty and
| in turn pricing power.
|
| https://en.wikipedia.org/wiki/Double_jeopardy_(marketing)
| RataNova wrote:
| It's funny how much "rational behavior" in economics often
| comes down to psychological inference
| BlandDuck wrote:
| > I always found this statement to be rather wishful.
| Individual lowering of prices makes sense if and only if your
| competitor is capable of saturating the market. Otherwise,
| demand elasticity becomes very relevant. Sure, your competitor
| may take the larger share of the market, but then you can
| compensate with higher per item profit.
|
| You should check the distinction between Bertrand and Cournot
| competition. Bertrand competition is price competition where
| the competitor can saturate the market, as you mention. Cournot
| competition, on the other hand, captures your intuition of
| competition on quantities rather than prices.
| dheera wrote:
| I once did an internship in a small town in Germany. There were
| 2 bakeries in this town. One closed for all of July as
| vacation, the other took all of August as vacation. They had
| coordinated this with each other so that everyone could always
| buy bread and pastries, but the bakers could also get their
| vacations. They would even put signs on their doors letting
| people know that the other bakery was open during their
| vacation.
|
| I feel like in the US or Asia this would never happen. In these
| hyper-capitalist and competitive societies, both bakeries would
| jump on the opportunity of extra business, sacrifice their
| family and fun time, and neither would take any vacation. Two
| bakeries in a town would see each other as mortal competitors
| instead of collaborators and take every opportunity to eat into
| the others' business.
| Workaccount2 wrote:
| The AI market is a prime example of intense competition going
| on right now. All the dynamics are there.
|
| If it was just one player, like Open AI, we'd still be at GPT-4
| turbo and it would cost $400/mo.
| MagicMoonlight wrote:
| They're all charging the same price...
| AnthonyMouse wrote:
| > Individual lowering of prices makes sense if and only if your
| competitor is capable of saturating the market.
|
| Individual lowering of prices makes sense if _you_ are capable
| of producing some amount more than you currently do.
|
| Suppose there are 10 suppliers, your production cost is $1 and
| the current market price is $2. You each sell 100 widgets and
| you yourself make $100, the other 9 providers also sell an
| average of 100 widgets, so there are 1000 total purchases.
|
| If you can produce 200 widgets and you lower your price to
| $1.90, you're now making $180 instead of $100, because people
| prefer to pay $1.90 to $2 until you run out of capacity.
| Moreover, the other suppliers have now collectively lost 100
| sales to you unless they match your price reduction and maybe
| some of them have higher costs than you and can't, which means
| you get to keep their share of the market. The other
| participants who have lower costs like you, even if they don't
| have any excess capacity, would rather make the ones who can't
| lower prices eat the loss in sales because it's better to lower
| margins by 10% than take an 11% reduction in sales. And
| lowering prices might also increase sales if customers buy more
| market-wide at the lower price.
|
| > Yet, if the rest of the market does not react to the signal,
| the one lowering their prices hurts their profits and possibly
| kicks themselves out of the market.
|
| How would the one lowering the price kick themselves out of the
| market? Their sales would only go up, or if consumers are
| completely insensitive to price, stay the same. As long as the
| lower price is still yielding them a net profit, they're still
| in the market. The theory isn't _expected_ to cause them to
| lower prices below their own costs, because of course they
| weren 't going to do that.
|
| If consumers are completely price insensitive and they didn't
| know that until they tried it, they might end up raising the
| price again because it didn't do any good, but that's also
| pretty uncommon. If you can get the exact same thing for less
| money, do _you_ pay more for no reason?
|
| > Turns out the probability of either move being the winning
| move is dependent on probability of other market participants
| colluding/defecting.
|
| Collusion is something else entirely. If all of the
| participants are getting together in a back room to fix prices
| then none of this applies, but that's also why there's a law
| against that.
|
| It's also why the theory doesn't work when the number of
| participants is very small.
|
| Suppose there are only two providers and they each have
| unlimited capacity. They each have a $1 cost, sell 500 widgets
| for $2 and make $500 each. If one of them lowers prices to
| $1.90, they'll sell 1000 widgets and make $900. Except that the
| other one will just match their price and then they'll each
| make $450 instead, which they both know so they both don't do
| it. And that's on top of explicit collusion being much easier
| to hold together and harder to detect when there are fewer
| sellers.
|
| That _isn 't_ what happens when there are 100 sellers, because
| then 99 of them are trying to hold together a cartel and the
| last one is laughing at them all because they can increase
| their sales by 10,000% by lowering prices by 5% and none of the
| others are matching them.
| naasking wrote:
| > Yet, if the rest of the market does not react to the signal,
| the one lowering their prices hurts their profits and possibly
| kicks themselves out of the market.
|
| The reason this doesn't happen is because the ones lowering
| their prices have typically done so due to explicit measures to
| improve efficiency, and so they already have a healthier margin
| with which to capture more of the market from competitors.
| bcrl wrote:
| The main difference between algorithms and humans is that
| software feels no guilt. Traditional human building
| superintendents were once happy with a 10% increase in rent
| from one tenant to the next, and would feel guilty when
| doubling prices. There are plenty of small business owners
| which take pride in delivering affordable prices to their
| customers across many market segments. Not a trait that is
| present in large corporations.
|
| One of the Behind the Bastards podcasts touched upon the fact
| that in the rental property market the 2 cloud vendors peddling
| software to manage properties could collude on behalf of
| landlords. Collusion by humans is fairly limited in scale, but
| when you're a "platform" every price can be set based on the
| prices of millions of listings -- what was once impossible for
| humans is now trivial.
| betimsl wrote:
| Who wrote the algorithm?
| alyxya wrote:
| It's possible algorithms simply drive up prices because price
| isn't the main factor some people use in deciding what to buy.
| Algorithms are probably able to learn that raising the price
| outweighs the decrease in the number of people buying something,
| and if every algorithm does the same, then prices will continue
| to rise.
| js8 wrote:
| How is this new compared to
| https://www.paecon.net/PAEReview/issue53/KeenStandish53.pdf ?
| (See the section "perfect competitors are not profit
| maximizers".)
| oxqbldpxo wrote:
| Is this applicable to the stock market? Maybe this is why
| valuations are completely devoid of any intrinsic value.
| AlGoreRhythm wrote:
| The author cites the common CEPR paper [0], but missed its most
| interesting finding. It found that the algorithms definitively
| did show signs of collusive behaviour, but that their chosen
| equilibrium price point was far below the Nash equilibrium. That
| is, the researchers expected these algorithms to maximally extort
| the consumers, but they only modestly extorted the economy's
| consumers.
|
| [0] - https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3304991
| munificent wrote:
| _> but they only modestly extorted the economy 's consumers._
|
| This is rational in the metagame where a maximally extortionate
| behavior invites attention and regulation.
|
| A parasite's goal is to suck as much blood as it can _without
| killing the host_.
| fellowniusmonk wrote:
| This was the Greystar situation that already happened with
| apartment rentals.
|
| Are people not aware of this?
|
| A switch to value based pricing for essentials
| (water,shelter,transport,utilities, etc.)is an extremely easy way
| to destroy disposable income and even make some areas impossible
| to live in for the existing members.
|
| Austin, Texas in 2021 saw several of my friends who were renters
| see a 1 year price increase that more than doubled their rent, I
| had friends who we're doctors who we're forced to move out of one
| bedroom apartments, even if it wasn't the plan, it's still a
| great way to displace people like local musicians so hack
| comedian can move in.
| hrimfaxi wrote:
| > Austin, Texas in 2021 saw several of my friends who were
| renters see a 1 year price increase that more than doubled
| their rent, I had friends who we're doctors who we're forced to
| move out of one bedroom apartments, even if it wasn't the plan,
| it's still a great way to displace people like local musicians
| so hack comedian can move in.
|
| Hack comedians are moving in while doctors are priced out? What
| are you even talking about?
| fellowniusmonk wrote:
| That's not what was said.
|
| There were different professional cohorts of people displaced
| as prices went up around the entire city, this is not a hard
| concept.
|
| This massive cultural displacement is part of what drove
| Austin to permit more new construction than any other city in
| the states.
|
| Fortunately musicians are still the single largest cohesive
| voting block in Austin.
|
| >it's still a great way to displace people like local
| musicians so hack comedian can move in.
| parineum wrote:
| > I had friends who we're doctors who we're forced to move
| out of one bedroom apartments ... so hack comedian can move
| in.
|
| It may not be a direct quote but it _is_ what you said.
| babush wrote:
| "Algorithmic collusion"... If using an algorithm leads to
| collusion, then choosing to use the algorithm should be
| considered regular collusion.
| IlikeKitties wrote:
| The Problem is that "using the algorithm" doesn't require you
| to use a computer. You can do this with pen and paper and it
| still works. You just have to ensure your competitor is aware
| of how the algorithm works, which is impossible to make
| illegal.
| babush wrote:
| I never mentioned a computer.
| RataNova wrote:
| Feels more like a system design failure than malice
| baerrie wrote:
| Profiting from a design failure indefinitely isn't malice,
| it's negligence that can still be considered criminal.
| walterbell wrote:
| https://news.ycombinator.com/item?id=45611361 On
| October 6, 2025, California Governor Gavin Newsom signed AB325, a
| law targeting the use and distribution of certain algorithmic
| pricing tools. This law is part of a larger legislative trend to
| try to reign in algorithmic pricing.. California's bill targets
| pricing algorithms in all markets and will take effect in 2026.
| However, a violation of the new law requires a conspiracy or
| price coercion, so as a practical matter, it may not extend the
| range of violations already encompassed by the Cartwright Act.
| LatteLazy wrote:
| I never understand why people don't pay more attention to "n" in
| these cases: number of other players.
|
| If there are 2 suppliers in a market, they will collude without
| algos or private meetings: I can be pretty sure you will not cut
| your price if I don't cut mine. The issue there is that there are
| only 2 suppliers, so trust is very easy.
|
| If there are 100 other suppliers, I know ONE of them will cut
| their price. So I best cut mine first.
|
| What I am trying to say here is that, algos or not, n is the
| major driver here imho.
|
| That's kind of interesting since the US has been very relaxed
| about falling values of n as long as prices seem ok.
| parineum wrote:
| "Algorithm" has got to be the least useful word in English today.
|
| It isn't the software that's responsible driving up prices, it's
| the information.
|
| > Yet a widely cited 2019 paper (opens a new tab) showed that
| algorithms could learn to collude tacitly, even when they weren't
| programmed to do so. A team of researchers pitted two copies of a
| simple learning algorithm against each other in a simulated
| market, then let them explore different strategies for increasing
| their profits. Over time, each algorithm learned through trial
| and error to retaliate when the other cut prices -- dropping its
| own price by some huge, disproportionate amount. The end result
| was high prices, backed up by mutual threat of a price war.
|
| This is nonsense. Those "algorithms" were programed to do that. I
| also notice they didn't add a third copy of the algorithm or a
| fourth. The summary of this research is that they built a novel
| algorithm (not one used in practice) and put it in a simulation.
| How this is representative of any real world scenario escapes me.
| They proved that software written to optimize profits optimizes
| profits. Shocking.
|
| The researchers quoted in the article are, essentially, defining
| collusion as knowing what competitors prices are.
| krapp wrote:
| >"Algorithm" has got to be the least useful word in English
| today.
|
| On the contrary, it's the word that's going to justify
| balkanization and government control of speech on the web. It's
| spooky magic that controls people's minds to most people. You
| know we're cooked when it becomes common on HN of all places to
| claim that "algorithmic feeds" should be illegal because
| they're the source of all society's ills, toxicity and
| political dissent.
| pessimizer wrote:
| > The researchers quoted in the article are, essentially,
| defining collusion as knowing what competitors prices are.
|
| It really is just another display about how injured the concept
| of "collusion" always was. Plenty of competitors have met in
| smokey rooms in order to fix prices, but you don't actually
| have to speak to each other to agree that if all of you can
| maximize your profits together, you should. Everybody knows how
| much everybody else is charging.
|
| The ideal competition myth only works in a fictional zero-cost
| startup, zero-cost supplier, zero-cost distribution scenario.
| In real life if you try to enter a market with a few
| competitors with super high margins, they'll just threaten to
| freeze anybody who buys from you or sells to you out of the
| market, then offer you a ticket into their cartel.
|
| Doesn't make it not evil, though, and it doesn't mean it's not
| an essential function of government to stop it. Government
| can't allow powerful little subgovernments to build up. You
| might as well allow paramilitary militias.
| jimnotgym wrote:
| > hard it may be to regulate
|
| Not hard at all. Outright ban fixes all.
| RataNova wrote:
| "Everything is working as intended" but the real-world outcome
| feels dystopian
| Arwill wrote:
| >strikingly high probabilities to very high prices, along with
| lower probabilities for a wide range of lower prices
|
| Isn't this describing the strategy of keeping ever high prices,
| then doing some temporary price cuts/sales/deals?
| bcrl wrote:
| I feel obliged to link to the Behind the Bastards podcast "Why is
| rent so damn high?" It's a lengthy 2 part piece, but quite
| enlightening. https://podcasts.apple.com/us/podcast/part-one-why-
| is-the-re...
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