Frontiers: Algorithmic Collusion: Supra-competitive Prices via Independent Algorithms
| dc.citation.issueNumber | 1 | |
| dc.citation.journalTitle | Marketing Science | |
| dc.citation.volumeNumber | 40 | |
| dc.contributor.author | Hansen, Karsten T. | |
| dc.contributor.author | Misra, Kanishka | |
| dc.contributor.author | Pai, Mallesh M. | |
| dc.date.accessioned | 2021-03-10T20:07:11Z | |
| dc.date.available | 2021-03-10T20:07:11Z | |
| dc.date.issued | 2021 | |
| dc.description.abstract | Motivated by their increasing prevalence, we study outcomes when competing sellers use machine learning algorithms to run real-time dynamic price experiments. These algorithms are often misspecified, ignoring the effect of factors outside their control, for example, competitors’ prices. We show that the long-run prices depend on the informational value (or signal-to-noise ratio) of price experiments: if low, the long-run prices are consistent with the static Nash equilibrium of the corresponding full information setting. However, if high, the long-run prices are supra-competitive—the full information joint monopoly outcome is possible. We show that this occurs via a novel channel: competitors’ algorithms’ prices end up running correlated experiments. Therefore, sellers’ misspecified models overestimate the own price sensitivity, resulting in higher prices. We discuss the implications on competition policy. | |
| dc.identifier.citation | Hansen, Karsten T., Misra, Kanishka and Pai, Mallesh M.. "Frontiers: Algorithmic Collusion: Supra-competitive Prices via Independent Algorithms." <i>Marketing Science,</i> 40, no. 1 (2021) INFORMS: https://doi.org/10.1287/mksc.2020.1276. | |
| dc.identifier.doi | https://doi.org/10.1287/mksc.2020.1276 | |
| dc.identifier.uri | https://hdl.handle.net/1911/110164 | |
| dc.language.iso | eng | |
| dc.publisher | INFORMS | |
| dc.rights | This is an author's peer-reviewed final manuscript, as accepted by the publisher. The published article is copyrighted by INFORMS. | |
| dc.title | Frontiers: Algorithmic Collusion: Supra-competitive Prices via Independent Algorithms | |
| dc.type | Journal article | |
| dc.type.dcmi | Text | |
| dc.type.publication | post-print |
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