points us to an amusing story by biologist Michael Eisen, about two Amazon book sellers who (it appears) each used algorithmic pricing to set their own prices on books off of what the other one was pricing it at, leading to an ever escalating price on this particular book about flies
. It started with someone looking up a copy of the book The Making of a Fly
on Amazon to order a copy for Eisen's research lab at Berkeley and noticing the odd pricing on a couple of used books:
And while everyone at first assumed a typo or some other mistake, they soon discovered it was likely something else:
Amazingly, when I reloaded the page the next day, both priced had gone UP! Each was now nearly $2.8 million. And whereas previously the prices were $400,000 apart, they were now within $5,000 of each other. Now I was intrigued, and I started to follow the page incessantly. By the end of the day the higher priced copy had gone up again. This time to $3,536,675.57. And now a pattern was emerging.
On the day we discovered the million dollar prices, the copy offered by bordeebook was1.270589 times the price of the copy offered by profnath. And now the bordeebook copy was 1.270589 times profnath again. So clearly at least one of the sellers was setting their price algorithmically in response to changes in the other’s price. I continued to watch carefully and the full pattern emerged.
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.
In other words, by basing the price on a specific multiple of each other's price, they created something of an infinite loop of automated pricing. Of course, since it only seemed to check once a day, the loop didn't spiral totally out of control (well, depending on your opinion of the value of a book on flies). Apparently, the escalation in price went on for another week and a half or so before someone finally noticed... but not before the book got all the way up to $23,698,655.93:
The book is apparently now available at a much cheaper "bargain" price, though you may want to pick up your copy for resale in the future if the "value" keeps appreciating.