Can algos collude? Quants are finding out
Oxford-Man Institute is among those asking: could algorithms gang up and squeeze customers?
Pricing algorithms—for anything from airline tickets to cinema seats—are a part of daily life. And daily life produces some of the most striking instances of what can happen when those algos go awry.
Take the bizarre story of a book about fruit fly genetics that wound up with a $24 million listing on Amazon in 2011. Two bookdealers that relied on Amazon’s pricing algos to maximize profit saw the algorithms become locked in a kind of inverse bidding war on Peter Lawrence’s The Making of a Fly
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