7 ms·

Wow, this is a brazen price collusion. No doubt about it. Using private data to fix prices and asking landlords to keep units vacant rather than decrease rents.

boole1854 4y ago
I'm not sure it's so clear. "Using private data" to set prices is hardly nefarious on its own, even if the result is higher prices. After all, "price stickiness" is a well known phenomena in the economics literature (and it can lead to sub-optimal allocation of resources). Maybe this is just a way to make prices less sticky. On the other hand, if the system recommends keeping units vacant, that does start to suggest that it is enabling landowners to take advantage of monopolistic pricing power. Yet higher vacancy rates could actually be socially optimal as well. A similar phenomena occurs in the movie theater business. Theater owners often price tickets such that the "vacancy" rates (empty seats) are quite high. However, a law that required pricing tickets low enough to fill all seats would reduce the return on equity in the industry so much that investment in the theater industry would plummet, vastly reducing the number of theater seats available available to fill consumer demand in the medium to long term.
- theGnuMe 4y ago
  >Theater owners often price tickets such that the "vacancy" rates (empty seats) are quite high. However, a law that required pricing tickets low enough to fill all seats would reduce the return on equity in the industry so much that investment in the theater industry would plummet, vastly reducing the number of theater seats available available to fill consumer demand in the medium to long term. This sounds like a nonsensical economic argument. Do you have a mathematical model that supports this argument?
- maerF0x0 4y ago
  Higher vacancy == more choice where to live. The customer does get at least some benefit.
- jeffbee 4y ago
  If the software allows them to take advantage of their supply monopoly, the software is not the problem. It's the lack of competition. Every housing discussion boils down to this: the black/grey stone/star/rock REITs are in this space because local governments have rigged the game to favor them. If the governments start rubber-stamping developer permits, the REITs will get their faces ripped off.
- wjnc 4y ago
  Different companies using the same AI for pricing support purposes could easily tip into illegal practices if there is a feedback loop from company to model. That’s just plain old collusion via a middleman. Lo and behold: “To arrive at a recommended rent, the software deploys an algorithm — a set of mathematical rules — to analyze a trove of data RealPage gathers from clients, including private information on what nearby competitors charge.” Dark times if the FTC isn’t picking this up.
  - acdha 4y ago
    I’d also add that this is going to fuel the importance of explainability in these systems. Even if your motives are completely fair, not being able to say why the system produced a particular output can look really bad in court. There isn’t an easy way to distinguish “they have no idea how this AI system works” from “they built it to avoid leaving a paper trail”.
  - boole1854 4y ago
    > Different companies using the same AI for pricing support purposes could easily tip into illegal practices if there is a feedback loop from company to model. While there are anti-competitive concerns with this kind of system, one of the points I was trying to make is that a problem requires more than there be simply a 'feedback loop'. Even in a market with 'perfect' competition, there can be feedback loops: e.g., an individual farmer might price their grain by checking the current market price which is tracked by a third party, and that third party determines the 'current market price' by querying the prices set by all farmers. The reason this isn't necessarily anti-competitive and can be compatible with 'perfect' competition is due to the other characteristics of the market (all participants are price takers, etc), not due to a lack of coordination between producing firms and market analytics firms.
    - wjnc 4y ago
      I agree. I was thinking about granularity / specificity but wasn't able to form a coherent train of thought. I'll give it a try. In my part of the world rents are often very naively indexed, say with CPI or CPI+. That is currently an issue, but usually pretty well functioning. Any individual has no influence on the CPI. So the CPI has a feedback loop, but no characteristic of influence. In an AI world that characteristic of influence is indeed not clear at first. I can only expect this to be a pretty dark AI considering the 'Great Succes' it is for the owners. I expect it to vacuum data from brokers in order to calculate a "willingness to pay" combined with a "propensity to pay" to calculate individual and portfolio optimal increases. How is this (/ could this be) collusion? Because the rent increase on property X1, owner Y1 (that is private information, at least I presume for the US rental contracts are 1-on-1 and not public information) is input for all the distributions over properties X and owners Y. I think your point that other market characteristics have a large impact on collusion (yes / no / degree) is subtle as well.
- ranman 4y ago
  You can't reasonably compare a housing vacancy tax with a hyperbolic straw man argument of a theater. It's not a similar phenomena at all, because it doesn't happen.
  - boole1854 4y ago
    I didn't bring up housing vacancy taxes, let alone compare them with anything else. I was making a point about the known limitations of the theory of perfect competition.
PaywallBuster 4y ago
It's just information It's up to the landlord to negotiate based on his individual situation (condition of the unit, demographics, furniture, etc) Not different from a company asking for "market data" regarding salaries and use that to _guide_ their salary offers to new candidates In the end the company will adjust their recommendation based on results/feedback from candidates (some companies could be popular/well liked and get away with lower compensation, and vice versa)
- tchaffee 4y ago
  All collusion is "just information".
- formerkrogemp 4y ago
  Ah yes the efficient market hypothesis in the form of data is why we can all join together and raise rent at 2-3X rate of inflation. Renters don't need half of their income anyways; the landlord can spend it much more efficiently on more investment property.
  - seanmcdirmid 4y ago
    It’s even worse than that. In an unregulated market, you can always just outbid someone else for a rental. But in a regulated market (with rent control or caps on rents), you can’t do that, and if supply doesn’t match demand, you just go homeless. A socialized market without landlords resembles the latter much more than the former, and having gone through the latter before, I don’t want to live in such a city again without some sort of guaranteed housing from whoever is making me move there.
    - formerkrogemp 4y ago
      I think that we can both agree that most everyone doesn't want to be homeless.
    - DanHulton 4y ago
      "You can always outbid someone else for a rental" is both not true and misses the problem that regulation aims to solve. You can only outbid someone if you have more money than them. The lower on the income scale you are, the less this is an option, until it just stops bring an option at all! Not to mention, it is drastically unfair and inhumane to consign people to live in the streets simply because they are poor, or simply poorer than the next. Rent control gives a measure of dignity to the poor, and ensures that -- at least a little bit -- when times get hard, we all suffer, the rich renters and the landlords too, not just the poor renters.

boole1854 4y ago

I'm not sure it's so clear. "Using private data" to set prices is hardly nefarious on its own, even if the result is higher prices. After all, "price stickiness" is a well known phenomena in the economics literature (and it can lead to sub-optimal allocation of resources). Maybe this is just a way to make prices less sticky. On the other hand, if the system recommends keeping units vacant, that does start to suggest that it is enabling landowners to take advantage of monopolistic pricing power. Yet higher vacancy rates could actually be socially optimal as well. A similar phenomena occurs in the movie theater business. Theater owners often price tickets such that the "vacancy" rates (empty seats) are quite high. However, a law that required pricing tickets low enough to fill all seats would reduce the return on equity in the industry so much that investment in the theater industry would plummet, vastly reducing the number of theater seats available available to fill consumer demand in the medium to long term.

theGnuMe 4y ago
>Theater owners often price tickets such that the "vacancy" rates (empty seats) are quite high. However, a law that required pricing tickets low enough to fill all seats would reduce the return on equity in the industry so much that investment in the theater industry would plummet, vastly reducing the number of theater seats available available to fill consumer demand in the medium to long term. This sounds like a nonsensical economic argument. Do you have a mathematical model that supports this argument?
maerF0x0 4y ago
Higher vacancy == more choice where to live. The customer does get at least some benefit.
jeffbee 4y ago
If the software allows them to take advantage of their supply monopoly, the software is not the problem. It's the lack of competition. Every housing discussion boils down to this: the black/grey stone/star/rock REITs are in this space because local governments have rigged the game to favor them. If the governments start rubber-stamping developer permits, the REITs will get their faces ripped off.
wjnc 4y ago
Different companies using the same AI for pricing support purposes could easily tip into illegal practices if there is a feedback loop from company to model. That’s just plain old collusion via a middleman. Lo and behold: “To arrive at a recommended rent, the software deploys an algorithm — a set of mathematical rules — to analyze a trove of data RealPage gathers from clients, including private information on what nearby competitors charge.” Dark times if the FTC isn’t picking this up.
- acdha 4y ago
  I’d also add that this is going to fuel the importance of explainability in these systems. Even if your motives are completely fair, not being able to say why the system produced a particular output can look really bad in court. There isn’t an easy way to distinguish “they have no idea how this AI system works” from “they built it to avoid leaving a paper trail”.
- boole1854 4y ago
  > Different companies using the same AI for pricing support purposes could easily tip into illegal practices if there is a feedback loop from company to model. While there are anti-competitive concerns with this kind of system, one of the points I was trying to make is that a problem requires more than there be simply a 'feedback loop'. Even in a market with 'perfect' competition, there can be feedback loops: e.g., an individual farmer might price their grain by checking the current market price which is tracked by a third party, and that third party determines the 'current market price' by querying the prices set by all farmers. The reason this isn't necessarily anti-competitive and can be compatible with 'perfect' competition is due to the other characteristics of the market (all participants are price takers, etc), not due to a lack of coordination between producing firms and market analytics firms.
  - wjnc 4y ago
    I agree. I was thinking about granularity / specificity but wasn't able to form a coherent train of thought. I'll give it a try. In my part of the world rents are often very naively indexed, say with CPI or CPI+. That is currently an issue, but usually pretty well functioning. Any individual has no influence on the CPI. So the CPI has a feedback loop, but no characteristic of influence. In an AI world that characteristic of influence is indeed not clear at first. I can only expect this to be a pretty dark AI considering the 'Great Succes' it is for the owners. I expect it to vacuum data from brokers in order to calculate a "willingness to pay" combined with a "propensity to pay" to calculate individual and portfolio optimal increases. How is this (/ could this be) collusion? Because the rent increase on property X1, owner Y1 (that is private information, at least I presume for the US rental contracts are 1-on-1 and not public information) is input for all the distributions over properties X and owners Y. I think your point that other market characteristics have a large impact on collusion (yes / no / degree) is subtle as well.
ranman 4y ago
You can't reasonably compare a housing vacancy tax with a hyperbolic straw man argument of a theater. It's not a similar phenomena at all, because it doesn't happen.
- boole1854 4y ago
  I didn't bring up housing vacancy taxes, let alone compare them with anything else. I was making a point about the known limitations of the theory of perfect competition.

PaywallBuster 4y ago

It's just information It's up to the landlord to negotiate based on his individual situation (condition of the unit, demographics, furniture, etc) Not different from a company asking for "market data" regarding salaries and use that to _guide_ their salary offers to new candidates In the end the company will adjust their recommendation based on results/feedback from candidates (some companies could be popular/well liked and get away with lower compensation, and vice versa)

tchaffee 4y ago
All collusion is "just information".
formerkrogemp 4y ago
Ah yes the efficient market hypothesis in the form of data is why we can all join together and raise rent at 2-3X rate of inflation. Renters don't need half of their income anyways; the landlord can spend it much more efficiently on more investment property.
- seanmcdirmid 4y ago
  It’s even worse than that. In an unregulated market, you can always just outbid someone else for a rental. But in a regulated market (with rent control or caps on rents), you can’t do that, and if supply doesn’t match demand, you just go homeless. A socialized market without landlords resembles the latter much more than the former, and having gone through the latter before, I don’t want to live in such a city again without some sort of guaranteed housing from whoever is making me move there.
  - formerkrogemp 4y ago
    I think that we can both agree that most everyone doesn't want to be homeless.
  - DanHulton 4y ago
    "You can always outbid someone else for a rental" is both not true and misses the problem that regulation aims to solve. You can only outbid someone if you have more money than them. The lower on the income scale you are, the less this is an option, until it just stops bring an option at all! Not to mention, it is drastically unfair and inhumane to consign people to live in the streets simply because they are poor, or simply poorer than the next. Rent control gives a measure of dignity to the poor, and ensures that -- at least a little bit -- when times get hard, we all suffer, the rich renters and the landlords too, not just the poor renters.