THE GAME THEORY OF HOW ALGORITHMS CAN DRIVE UP PRICES

Summary from the TLDR newsletter

Intentional price-fixing through collusion has long been illegal. Sellers are increasingly relying on algorithms that repeatedly adjust prices in response to new data about the state of the market. It is much harder to ensure these algorithms set fair prices as there is no explicit collusion. Algorithms can collude tacitly even when not programmed to do so. One way to fix this problem is to ban all pricing algorithms except the no-swap-regret algorithms that game theorists favor. There are methods for checking if an algorithm has a no-swap-regret property without looking at its code, so there are practical ways of enforcing this idea.