Slashdot Mirror
Algorithmic Pricing On Amazon 'Could Spark Flash Crash'
DerekduPreez writes "Sellers on Amazon's retail site are increasingly using high-speed algorithmic trading tools to automatically set prices, which could lead to a malfunction similar to the 2010 flash crash. According to the Financial Times, prices on Amazon's website change as often as every 15 minutes, where sellers are using tools traditionally developed by data miners at banks to ensure that their prices are always below their rivals'. Third-party software is allowing sellers to detect a competitor's price and automatically undercut that price by, for example, £1. However, this could lead to a situation similar to the U.S. flash crash, where algorithmic trading was blamed for stock prices falling to near zero and then bouncing back within 20 minutes." At Slashdot's sister site for Business Intelligence, Nick Kolakowski has some more information on this possibility.
Well, that depends how and when the prizes are determined. If you are browsing a page with article of, say, $2, and it costs $20 as you enter the shop, you're just mislead.
Apart from that, our economics are based on a stabilizing situation. If something is sold too cheap, it will be corrected in due time. If something is sold too expensive, that would be corrected also. In that equilibrium, consumer and producer would meet half-way their self-interest. So in the end, the price is "right".
High-speed trading is an unstabilizing situation, meant to just suck money out of a trade. From a consumer's point of view, the price is now always wrong. Nothing of value is bought with it, and the customers pay dearly for that nothing.
Nae king! Nae laird! Nae yurrupiean pressedent! We willna be fooled again!
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That's how true unregulated Free Market economies end, which is why they're a bad idea.
I've no idea if that's even true; It just makes sense that it would happen.
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That's called dynamic pricing, and Amazon did it at one point.
Of course, the problem with dynamic pricing is it relies on the ignorance of the user. As discovered in that article, if you use a different browser or not logged on, it would display a different price than when you went to check out.
And with the proliferation of smartphones and tablets, it's possible someone might browse Amazon and buy on their PC, and realize the price is different. You'd basically need to give everyone a personal ID code to ensure whatever screen they look at shows their own price. Which breaks the moment someone else looks up the item and gets a different price.
Dynamic pricing only works when the user is treated in aggregate (e.g., a vending machine that alters prices based on outside temperature but everyone pays the same), or the user cannot inform themselves of alternative pricing.
It should also be differentiated from preferential sorting - where a person who buys premium products will do a search and be shown the premium products first, then the cheaper ones down the line. Done right, preferential sorting can make a search engine seem "good" at finding stuff the person wants without having to wade through listings of cheaper stuff they don't want.
People who bitch about government regulation behing high barriers to entry are usually just whiny bitches who couldn't succeed in the first place.
This is not true in my experience. Often times people have been making a perfectly viable living doing a certain thing, and then excessive regulation pushes them out of the market so the big players can take over. Larger players are the ones with the lobbyists to help define the red tape, and the money/lawyers to spend on navigating it.
Go try to harvest oysters or clams in a Florida harvesting area. The startup capital is a bucket and some mud-boots. The regulatory hoops you much jump through to get that shellfish harvesting certificate are insane. The direct costs paid to the State are only a couple hundred dollars, but you have the cost of inspections (for the "washing facility", aka a sink), the cost of training, the cost of the government mandated tags that denote the area, condition, and purpose of the shellfish (different requirements for raw, on the half-shell oysters vs the ones for cooking vs ones for freezing vs ones for personal consumption), then the cost of yearly assessments. These costs can easily add up to dozens of thousands of dollars, and are considerably higher than the startup costs.
With all due respect, people that say things like that don't seem to have any experience doing something that is regulated, and therefore talk out of their ass.