The Game Theory of How Algorithms Can Drive Up Prices

Recent findings reveal that even simple pricing algorithms can make things more expensive.

Imagine a town with two widget merchants. Customers prefer cheaper widgets, so the merchants must compete to set the lowest price. Unhappy with their meager profits, they meet one night in a smoke-filled tavern to discuss a secret plan: If they raise prices together instead of competing, they can both make more money. But that kind of intentional price-fixing, called collusion…

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The post The Game Theory of How Algorithms Can Drive Up Prices first appeared on Quanta Magazine

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