Imagine a town with two widget merchants. Customers prefer cheaper widgets, so the merchants must compete to set the lowest price. Unhappy with their meager profits, they meet one night in a smoke-filled tavern to discuss a secret plan: If they raise prices together instead of competing, they can both make more money. But that kind of intentional price-fixing, called collusion, has long been illegal. The widget merchants decide not to risk it, and everyone else gets to enjoy cheap widgets.
For well over a century, U.S. law has followed this basic template: Ban those backroom deals, and fair prices should be maintained. These days, it’s not so simple. Across broad swaths of the economy, sellers increasingly rely on computer programs called learning algorithms, which repeatedly adjust prices in response to new data about the state of the market. These are often much simpler than the “deep learning” algorithms that power modern artificial intelligence, but they can still be prone to unexpected behavior
The Game Theory of How Algorithms Can Drive Up Prices
Submitted 11 hours ago by cm0002@lemmy.zip to technology@lemmy.zip
https://www.quantamagazine.org/the-game-theory-of-how-algorithms-can-drive-up-prices-20251022/
BlameTheAntifa@lemmy.world 9 hours ago
It’s corrupt, illegal steering with one extra digital step. But the collapse of the economy is fine, because computers are helping them do it.