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Pricing algorithms can learn to collude with each other to raise prices
- victorNicollet 8y agoThis result is not surprising. Having a rule that sets your prices, with your competitors' prices as the only variable input, creates a dynamic system that can easily converge on supracompetitive prices with the right parameters, and you are likely to change parameters when they result in a price collapse in the first few days of operation, overfitting your way into mutual agreement. I would be interested to see if a pricing system that tries to estimate elasticity and seasonal demand (and product lifecycle), in effect using customer behaviour as an input, can also converge in this way in a reasonably short time.