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Businesses Math The Almighty Buck

Algorithmic Pricing On Amazon 'Could Spark Flash Crash' 274

Posted by timothy
from the these-tulips-on-special dept.
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.
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Algorithmic Pricing On Amazon 'Could Spark Flash Crash'

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  • by bhlowe (1803290) on Tuesday July 10, 2012 @10:56AM (#40602019)
    I didn't read the article, but presumably the traders wouldn't allow their sale price to drop below the cost of the item plus the marginal expense to sell on Amazon.... so if anything, the prices will drop to at or near the cost of the item... Which is good for buyers, bad for resellers...
    • by jpmorgan (517966) on Tuesday July 10, 2012 @11:00AM (#40602079) Homepage

      And if they do, it's still good for the buyers, and the sellers aren't likely to make the same mistake twice.

      With algorithmic pricing, the Amazon marketplace is just operating as an automated dutch auction [wikipedia.org]. It's how markets should behave: raw supply and demand, with no collusion or other market distortions propping up prices.

      • by jrroche (1937546) on Tuesday July 10, 2012 @11:25AM (#40602395)

        With algorithmic pricing, the Amazon marketplace is just operating as an automated dutch auction [wikipedia.org]. It's how markets should behave: raw supply and demand, with no collusion or other market distortions propping up prices.

        Because everyone automatically undercutting their competitors by a few cents over and over until everyone is selling at cost and all but a couple players eventually have to shut down because they can't afford to run a profitless business forever, whereupon the few remaining players can finally raise prices ... isn't effectively collusion or a market distortion.

        • by L4t3r4lu5 (1216702) on Tuesday July 10, 2012 @11:34AM (#40602515)
          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.
          • Re: (Score:3, Interesting)

            by roman_mir (125474)

            Your comment is so stupid, it's beyond words.

            It's not the ECONOMY that 'ends' in a free market when somebody stops making a profit, it's that specific business model that puts somebody out of business ends and the market actually LEARNS something from that mistake.

            Now contrast with the government ran economies - the same stupid thing is done over and over and over, the money is printed, the inflation causes savings to be wiped out or moved out and asset bubbles form while productivity falls.

            Then the recessi

        • until everyone is selling at cost and all but a couple players eventually have to shut down

          Or at least withdraw some product lines. Or a seller might not go for the absolute lowest price on a particular item but instead shoot for breadth of available products, allowing discounts on combining multiple products into one shipment.

          whereupon the few remaining players can finally raise prices

          Causing the sellers that had withdrawn some product lines to reintroduce those product lines.

        • by Bob9113 (14996) on Tuesday July 10, 2012 @11:51AM (#40602771) Homepage

          Because everyone automatically undercutting their competitors by a few cents over and over until everyone is selling at cost and all but a couple players eventually have to shut down because they can't afford to run a profitless business forever, whereupon the few remaining players can finally raise prices ... isn't effectively collusion or a market distortion.

          Your comment is exactly correct, but I get the feeling you are trying to be snarky. You also fail to mention the next step after the remaining players raise prices: New competitors enter the market, undercut the would-be oligarchs, and the process starts all over again. The lower the barriers to entry (and with Amazon, they are very low (except that Amazon is the sole supplier (but I digress))), the lower the cost for the new competitors to jump in.

          Eventually, equilibrium is reached at the point where the cost of entering the market plus the time value of the startup money is just covered by the profit over the average lifespan of a new entrant. It is a naturally self-regulating system that seeks the optimal market price of consumer goods and constantly adjusts for the changing time value of money. Pretty cool stuff, right?

          • by s73v3r (963317) <s73v3r&gmail,com> on Tuesday July 10, 2012 @12:59PM (#40603773)

            New competitors enter the market, undercut the would-be oligarchs, and the process starts all over again.

            Except this isn't guaranteed to happen. And should someone try it, the oligarchs are established players in the market, with access to far greater amounts of resources than the startup. Hell, most of the time one of the oligarchs just buys the startup.

          • by dell623 (2021586) on Tuesday July 10, 2012 @01:19PM (#40604057)

            Even if the price of selling in the market is low, the price of production, especially the capital costs are often not low. And once players are driven out of the market, the capital costs need to be paid all over again for any new entrant. Which means that the monopoly or duopoly parties can temporarily cut prices to make it uneconomical for any new parties to enter the market. And so no new competitors enter the market.

            So no, it's not a naturally self regulating ideal system. At least everyone stopped pretending any marxist/socialist system is 'ideal', somehow free marketeers can still get away with making that absolutist claim.

            • Even if the price of selling in the market is low, the price of production, especially the capital costs are often not low. And once players are driven out of the market, the capital costs need to be paid all over again for any new entrant. Which means that the monopoly or duopoly parties can temporarily cut prices to make it uneconomical for any new parties to enter the market. And so no new competitors enter the market.

              At least, until the monopoly or duopoly raises prices and then it becomes economical again for new competitors to enter. And so, virtual competition regulates the market: The monopolist is forced to keep their prices low, lest they invite new competition.

              Now, you might argue that's a bad thing, because a monopoly means there are few choices. But that assumes that more choice is always a good thing, no matter what it costs. The reality is that, every time you have multiple competitors in a market, you have d

          • . The lower the barriers to entry (and with Amazon, they are very low (except that Amazon is the sole supplier (but I digress))), the lower the cost for the new competitors to jump in.

            You skipped the part where - any time new competitors do jump in - the established businesses can afford to once again cut their prices until the new competitors can no longer compete.

            Eventually, equilibrium is reached at the point where the cost of entering the market plus the time value of the startup money is just covered by the profit over the average lifespan of a new entrant. It is a naturally self-regulating system that seeks the optimal market price of consumer goods and constantly adjusts for the changing time value of money. Pretty cool stuff, rig

            Assuming that everyone is acting in rational self-interest. Once you leave the "rational" part out - as the larger players inevitably do - then you have the situation above, where any new competitors are effectively locked out.

            • by 0123456 (636235)

              You skipped the part where - any time new competitors do jump in - the established businesses can afford to once again cut their prices until the new competitors can no longer compete.

              And?

              You seem to have missed the part where the 'established businesses' get to ever raise prices high enough to rake in a vast EVIL MONOPOLY profit without competitors coming along to under-cut them.

              Because, absent government regulations to keep new competitors out of the market, they don't.

            • I might be wrong, but it seems to me like the only time a new competitor should try to enter an established market for a commodity product would be if that new competitor has some novel way to cut the costs of providing that product or they can add value that the established competitors cannot.

              If they can lower the cost of providing the product sufficiently, they would thus be able to survive while the established players take losses that are unsustainable when dropping price. If they can put in an added va

        • by TubeSteak (669689)

          Because everyone automatically undercutting their competitors by a few cents over and over until everyone is selling at cost

          This is what free market theory predicts (cost + normal profit). This is a good thing for buyers.

          and all but a couple players eventually have to shut down because they can't afford to run a profitless business forever, whereupon the few remaining players can finally raise prices ... isn't effectively collusion or a market distortion.

          This is what happens in real life. This is not a good thing for buyers.

          It's what we had 100+ years ago and regulating that anti-competitive behavior was considered "market reform"
          Nowadays, removing regulations on anti-competitive behavior is considered "market reform"
          How did we get here?

        • by jafiwam (310805)

          With algorithmic pricing, the Amazon marketplace is just operating as an automated dutch auction [wikipedia.org]. It's how markets should behave: raw supply and demand, with no collusion or other market distortions propping up prices.

          Because everyone automatically undercutting their competitors by a few cents over and over until everyone is selling at cost and all but a couple players eventually have to shut down because they can't afford to run a profitless business forever, whereupon the few remaining players can finally raise prices ... isn't effectively collusion or a market distortion.

          .... and the Chinese will simply run a few more hours and make the supply available to the next startup person that wants to try because the artificially inflated price only has one seller so there's lots of room for a startup.

          Your worst case scenario horror story is weak (friendly lucky duck) sauce.

          They aren't selling 8000 kilowatt step down transformers on Amazon, it's LED based non-replaceable battery finger flashlights and other crap.

        • Because everyone automatically undercutting their competitors by a few cents over and over

          I do consider cost, but if it's in the ballpark, I buy from the highest rated reseller that's closest to me (decreass shipping time). At no time do I buy from a low-rated seller.

          A few cents (or dollars) doesn't impact my buying decisions in the Amazon Marketplace. One has to assume that all buyers always buy the lowest priced item to make this death-spiral hold up, which isn't so.

    • by MortimerV (896247) on Tuesday July 10, 2012 @11:07AM (#40602153) Homepage

      Exactly, a floor price is used to prevent this sort of crash from happening. I'd imagine there could be some sellers on there that haven't set up their floors properly and they could lose money on a few products, but the entire site won't implode from this.

      If those sellers don't honor the prices, they'll get bad user ratings and lose some future sales over it.

    • by N0Man74 (1620447) on Tuesday July 10, 2012 @11:20AM (#40602313)

      Floors are good, but so are ceilings.

      Amazon’s $23,698,655.93 book about flies [michaeleisen.org]

    • by History's Coming To (1059484) on Tuesday July 10, 2012 @11:20AM (#40602319) Journal
      You'd be surprised, there are many businesses built around a model of selling at a loss for the first year or two just to pressure the competition and build a reputation as the cheapest, then they ramp the price up once they have a sufficient chunk of the market. Businesses will also sell old stock at a loss simply to free up capital that's trapped in stockholding.
      • by ZorinLynx (31751)

        Best Buy is my favorite historical example of this. Back when they started they were famous for selling music at well below the prices of their competitors.

        I bought so many CDs there in those first few years. Then once they had a market, they raised the price to match everyone else.

        (This was before the "MP3 revolution", when CDs were still the only good way to get music)

      • Businesses will also sell old stock at a loss simply to free up capital that's trapped in stockholding.

        Not to mention that often you're charged a restocking fee by your distributor and it counts against your account purchase totals (which grant you perks such as line discounts, better rates overall, etc).

        When I was running my business our main distributor would allow a 6 month restock, but with a 15% fee. We'd simply put inventory that wasn't moving that we would have returned on "clearance" at (or up to the 15% below) cost to get rid of it. It was only things that we literally thought we'd never get rid of

    • by mr1911 (1942298)

      presumably the traders wouldn't allow their sale price to drop below the cost of the item plus the marginal expense to sell on Amazon

      Presumptions are dangerous. There are many instances where items are sold below cost.

      To your point, there should be a floor price and/or a cap on the number of units sold at the discount prices. In reality the sellers are not always as forward thinking as you would expect them to be and the "flash crash" situations occur.

  • Problem? (Score:5, Insightful)

    by Bigby (659157) on Tuesday July 10, 2012 @10:56AM (#40602027)

    And that is a problem, why? Just like in the flash crash, some people lost money and some people got big deals. If you don't want it to affect you, don't get involved. In both cases, it hurts the organizations and institutions more than an individual trader/buyer/seller.

    • Re:Problem? (Score:5, Insightful)

      by space_in_your_face (836916) on Tuesday July 10, 2012 @11:01AM (#40602099)
      From TFA: Jack Sheng of eForCity, which sells electronics on Amazon, warned of the dangerous impact algorithmic pricing could have on the retailer’s prices: “If something is mispriced down to $1, your inventory can be cleaned out in no time.”
      I hope you put a minimum price on every item for which an algorithm decides the price. If so, I don't see the problem if someone "clean out your inventory". It means a lot of sales at a price you agreed...
      OTOH, if you didn't put a minimum price, you just get what you deserve.
      • Re:Problem? (Score:5, Insightful)

        by darkwing_bmf (178021) on Tuesday July 10, 2012 @11:08AM (#40602167)

        This is the kind of problem that is solved with natural selection. The companies too stupid to put in a minimum price will go out of business and the remaining companies will be stronger.

        • by s73v3r (963317)

          and the remaining companies will be stronger.

          That's not always a good thing. Stronger companies tend to have more power and more money, meaning they can bully both competitors and users around.

      • by gorzek (647352)

        There has to be a way to set a minimum price, otherwise this system is too dangerous for any seller to want to use.

        • by DarkOx (621550)

          It sounds simpler than it is. Lets say you use a simple cost + model. Suppose you bought 10 widgets whole sale at $5 and the current retail price is $6.99. Widget 2.0 comes out. The whole sale price the manufacture is using to clear inventory moves to $3.10. Your competitors let their algorithms run and things settle at $4.50 retail. You stuck a floor into your pricing system of $5.01 your cost. Trouble is now while your were not paying attention to that specific SKU because you sell 1000's of SKUs;

          • by gorzek (647352)

            And if you were using the "old" system, in which you have to manually adjust prices, the same (or worse) wouldn't happen?

            Every time you put in a new SKU, you should be setting its "minimum reserve" price.

            I'm not sure how Amazon handles this in the automated pricing system, but it shouldn't work out to be any worse in terms of lost opportunities than the existing system (in which the price never changes whatsoever unless you go in and change it yourself.)

            • by DarkOx (621550)

              And if you were using the "old" system, in which you have to manually adjust prices, the same (or worse) wouldn't happen?

              It certainly can and does happen. Which is one of the many reasons lots of small shops have trouble competing.

                  I was simply addressing the "Just set you price floor to cost." The fact is there are reasons you would want to sell under costs and even cases where you would want that to happen without intervention.

              • by CastrTroy (595695)
                Small shops have trouble competing because they have a higher cost price. The bigger shops, who sell more get preferential pricing from the suppliers. Even if the small guy sold everything at cost, the big guy would still be able to undercut him because his cost price is much lower.
      • Re:Problem? (Score:5, Interesting)

        by Kjella (173770) on Tuesday July 10, 2012 @11:28AM (#40602431) Homepage

        Approximately 99.999% of all shops I know both online and offline have some sort of "typo clause" in their terms and conditions, if their $100 item is suddenly $1 for some reason I think most will choose to exercise it if the algorithm goes completely bonkers. But if it's a minor mispricing relative to the item value or their total sales and they don't want the flurry of 1-star reviews that's bound to follow, they eat that loss. Been there, done that, got my order fulfilled - let's call it a surprise sale for both parties. If you're fucking this up so badly you can't take it, you really got no business running a retail store.

        • by ceoyoyo (59147)

          Interesting. Where I live there's a law that if the register rings up a price higher than the price on the item, you pay the lowest price minus 10%. It encourages retailers to set their prices carefully. Usually what happens is that someone discovers a mismatch, gets the deal and the retailer hurriedly fixes the price tag.

          Kind of sucks if you're an online retailer and you can sell out before you notice the problem, but those are the risks you take if you use an automated system.

    • by Hatta (162192)

      If you don't want to be affected by the stock market, don't invest. Is that really what you mean to say?

      • by Bigby (659157)

        Yes. Invest in yourself. Invest in private businesses. Start a company.

        Also, we are talking about highly liquid markets. Long term investments are not affected by flash crashes...as long as you don't set trailing stops, etc...

        • Start a company.

          That's not for everybody. For one thing, it costs money to learn how to run a business (MBA). For another, I get the impression from several recent Slashdot stories that a lot of startups end up killed by exclusive right trolls, with a legal team unable to bear the cost of being buried in motions.

          • That's not for everybody. For one thing, it costs money to learn how to run a business (MBA)

            I would hardly say having an MBA means you can run a business, especially given how many MBAs I have see that can't seem to manage their way out of a wet paper sack.

      • by s73v3r (963317)

        If you don't want to be affected by the stock market, don't invest.

        Except that's entirely, utterly, and completely false. Every single motherfucker in the country is affected by the stock market, regardless of their level of investment, or lack thereof, in the stock market.

        • by Hatta (162192)

          Yes, I was rephrasing the OPs post in a way that would hilight its flaws.

    • Re:Problem? (Score:5, Informative)

      by Errol backfiring (1280012) on Tuesday July 10, 2012 @11:09AM (#40602179) Journal

      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.

      • 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".

        It does not exist on real life. Most sellers force the price it wants, and uses its market share, patents, lobbys, even guns for hire (seriously) to prevent any competition.
      • by Idbar (1034346)
        I've noticed many sellers are simply reducing the product price, but compensating on the shipping costs, which drags you to believe the item is lower priced and that you would be able to find it at that price somewhere else but with cheaper shipping costs.

        This has been hitting Amazon, Google Shopping, etc. So, my take on this, is that it's simply tricking the customers to believe they can get something cheaper when it's going to cost the same or more than anywhere else. (Similar to the .999 gas price tech
    • by superid (46543)

      I'm sure some people got good deals in the flash crash but IIRC didn't the NYSE back out many of the trades saying that they were erroneous?

      • Unfortunately yes. If you or I as an individual investor would have screwed up like that they wouldn't roll back our transaction. I actually wouldn't care if all actors were treated the same but as there are some that get preferential treatment like having bad transactions rolled back while others don't. I would have loved to see the market punish bad actors, but since they fall into the too big to fail category it will never happen.
    • by magarity (164372)

      And that is a problem, why? Just like in the flash crash, some people lost money and some people got big deals.

      No, they don't. The sellers will notice the price dip and cancel all the sales with the excuse of it being a mistake.

    • And that is a problem, why? Just like in the flash crash, some people lost money and some people got big deals.

      And just like in the flash crash, the people that lose money tend to be a lot stupider than the people that make money.

      If you don't want it to affect you, don't get involved.

      Or go ahead and get involved, but just don't be an idiot. You can avoid losing money by inserting these six lines of code into your algorithm:

      profit = sales_price - cost_of_product - transaction_cost;
      if (profit > 0.0) {
      do_transaction();
      } else {
      wait_for_a_better_offer();
      }

      This source code is in the public domain. Feel free to use it.

    • by s73v3r (963317)

      And that is a problem, why? Just like in the flash crash, some people lost money and some people got big deals.

      By "some people got big deals", you mean the insiders, right? No normal person made any money off that.

  • by msgmonkey (599753) on Tuesday July 10, 2012 @10:57AM (#40602031)

    I'd like to see what happens when the sellers stop fulfilling orders. Plus how long before someone brings out a sniping tool for customers to purchase items when at the bottom of the curve?

  • Each vendor needs to add "is it worth it to let others control our prices" logic to its auto-pricers.

    Is it worth it to let a widget normally priced at $10 to drop to $5? to $1? to $0.01?

    Except for deliberate loss leaders and other promotional items, you may want to set your short-term "floor" to be somewhere around your actual costs and your long-term "floor" to be a bit higher.

    If a competitor undercuts you below where you are willing to let your program auto-price and he keeps it there, you may want human

  • So what? (Score:5, Interesting)

    by Lev13than (581686) on Tuesday July 10, 2012 @10:59AM (#40602065) Homepage

    As long as Amazon forces the sellers to honour the price, then I don't see a problem. Pure market forces will balance the risk/reward for dynamic prices - if one or two consumers get lucky, then that's the cost of doing business.

    The biggest mistake that the exchanges made following the flash crash was to cancel the errant trades - if you fuck up the pricing, you need to deal with the consequences. Getting rid of downside risk removes half the equation and blocks any incentive to play smart.

    • by gorzek (647352)

      Amazon processes the payments and it's all done as one transaction: you say "I want to buy this item," Amazon shows you what you will be charged, you complete the transaction, done. The seller would only be able to reverse it (such as if they are out of stock), not initiate a new one or change the price after the fact.

      • Letting the seller claim to be out of stock after the fact breaks the downside for them. Amazon needs to require they ship the goods that were paid for. Sellers can dynamically update there stock levels as sales via other methods come in.

        • by gorzek (647352)

          Sure, but nothing is perfect, and any sales done outside Amazon's system are not necessarily going to be reflected in real-time on Amazon's side.

          Requiring the seller to honor an out-of-stock product at the stated price could easily be very onerous to the seller--what if there is no more stock to have, ever? This does happen.

          The seller can either fulfill the order or cancel it with a refund. The buyer either gets the item or gets their money back, so I'm not sure where the harm is done to the buyer (other th

          • by ceoyoyo (59147)

            The risk (to Amazon) is that their pricing will become a joke and nobody will use it.

            If I buy something that looks like a good deal on Amazon and I'm consistently told that the seller is out of stock, I'm going to quit using Amazon.

            • by gorzek (647352)

              Yup, and I doubt Amazon would take that lying down--instead, they would take it out on the sellers.

      • by rickb928 (945187)

        That's almost funny.

        If the seller finds that the price was driven below cost by the algorith, how much would you want to bet that they will simply declare the item 'out of stock', and refuse to sell to you?

        Groupon has been through an analog of this repeatedly, where someone will offer services for a discount, and get flooded with redemptions such that they cannot afford to do several years' work for nearly nothing. All the examples I'm aware of resulted in the offerer negotiating with their customers and r

        • by gorzek (647352)

          I suppose they could do that, but then the user should be able to rate them negatively. Enough users give them a bad rating for being consistently out-of-stock, their listings will decline and sales will drop. Self-correcting, I would say.

          Sellers and Amazon both have incentives to protect their reputations. Yeah, maybe some fly-by-night seller doesn't give a shit and is just trying to game the system, but then they aren't going to get positive ratings, either. If Amazon picks up on someone screwing with the

      • Re:So what? (Score:4, Insightful)

        by timeOday (582209) on Tuesday July 10, 2012 @11:58AM (#40602873)
        I like to accumulate things in my Amazon "shopping cart" sometimes over a period of weeks until I have enough for free shipping, or finally decide whether I really want something. But I have found this increasingly nonproductive as prices jump all over the place constantly. Most of what I put in my basket is "no longer available from seller" or the price goes up a little a few days later.

        I'm not saying I've being cheated, but I'm enjoying Amazon less as it's becoming less of a storefront and more of a bazaar-type experience, with wildly varying shipping costs and return policies from item to item. I might as well go on ebay, or else a more conventional storefront like newegg if I don't want the hassle.

        • by fatphil (181876)
          I notice that there's always a problem paying for flights with RyanAir. I go through the process a second time, and the price has gone up. They're crooks in almost every other possible regard (e.g. they'll charge you 24e in credit card fees for 2 people 2 ways on 40e flights. (i.e. 15% is a 'hidden' fee)) so I'm presume this is deliberate too.
        • I'm the same way. Every time I log into Amazon now I have a whole page of "This item's price has changed" notices. But I can deal with that versus some of the other changes I've noticed recently.

          Amazon apparently changed the algorithm for deciding which item gets returned when you search for something that has multiple listings. If I search for some SD cards, the one returned is never the cheapest and often isn't even the real Amazon listing but some random storefront. And where I used to find that Amaz

    • They don't, which is why this story doesn't make sense. If you order something from a 3rd party seller on Amazon at a too-good-to-be-true price you're wasting your time because it will be canceled.
  • So what? (Score:5, Interesting)

    by SirGarlon (845873) on Tuesday July 10, 2012 @11:00AM (#40602085)

    Who, other than the retailers, care if there is a "flash crash?" Presumably if they lose enough money on flash crashes they will stop with the algorithmic pricing.

    Likewise, if I find algorithmic pricing makes prices unattractively high, I'll shop somewhere else. There has to be someone out there selling a product similar to what I want, without the algorithmic gouging.

    In short, I think this is one case where we can trust the market to operate correctly.

    • by ceoyoyo (59147)

      It would be an interesting experiment for someone to start up a stock exchange that has a two minute delay on trades or some other barrier to HFT. See if it wins in competition with the others.

  • If you think about this for 1min, you will realize that all the sellers have to buy the stuff themselves from somewhere. Obviously they will put in a limit so the price will never go so low that they would make a net loss. An since the buy-prices are not depending on the amazon-sell-prices, no such "flash crash" could possibly ever happen. Of course I do not expect some journalist to think for 1min before writing an article.
  • But if I buy a paperback copy of "Fifty Shades of Grey" for only $0.10 due to a flash crash in autogenerated stock prices, I metaphysically lose, society loses, civilization loses. The seller still wins, Mephistopheles wins, evil triumphs.

    • by rickb928 (945187)

      With any luck, evolution kicks in and such sellers die off. The stronger/smarter survive. We pay what we should expect to.

      My morning commute is usually 30 minutes. The afternoon commute at least 45 minutes, same route in reverse. All I Want© is to have a speed-limit ride. I don't need to get there faster, I just want predictability. In the morning, we are largely all into predictability. In the afternoon, we are joined by idiots that must have speed over predictability, so bad things happen and

      • the solution is to have a job/ living location where you can walk or ride your bike back and forth. that is the now the evolutionary prerogative, once you consider oil price volatility as well

        or ride a train

        but we live in a country where mass transit is some sort of socialist evil

        therefore, the entire country is doomed according to your parameters

    • But if I buy a paperback copy of "Fifty Shades of Grey" for only $0.10 due to a flash crash in autogenerated stock prices, I metaphysically lose, society loses, civilization loses. The seller still wins, Mephistopheles wins, evil triumphs.

      I'm curious how the seller wins in your scenario.

      And how you lose.

      Looks to me like he loses, and you win.

  • Would be nice to have a cron job that detects when the price hits 0.

  • From the TFA:

    However, some sellers are also creating fake accounts with extremely low prices in an attempt to automatically pull down the price of rival products so that they can buy up their competitor’s stock.

    It seems to me that that is a matter for law enforcement. Since they would not actually sell those products in good faith. 'Fraud' is the operative word.

    As for an Amazon flash crash. I mean, okay, maybe. But what is the big deal if the price of a Dixon stereo tanks artificially? I mean ex

    • by rickb928 (945187)

      Again, Amazon should punish sellers that don't honor their pricing. Simple concept. Ask eBay.

    • by ceoyoyo (59147)

      "if a blue chip stock price crashes in some kind of algorithm-fueled artificial negative feedback loop, billions can be lost... and thousands of jobs"

      I don't understand the difference. If the blue chip price crashes, the idiots who put out low sell prices will lose money and get fired. That's so sad. Those people should be out of business. The problem comes when you protect those people, such as by reversing trades after the flash crash.

  • At least, our office just glances at the current prices and then sets ours a dollar lower. We don't use any fancy third party tools. We find the product, find the price, and undercut it. Our stuff usually sells within 24 hours this way. Then again, we're just selling used IT equipment, one old scanner at a time.
  • by Qbertino (265505) on Tuesday July 10, 2012 @11:46AM (#40602701)

    A little history:
    I was the first to automate price wars on amazon marketplace. (True thing.)

    A friend had just joined marketplace with a freshly founded internet media sales joint after it opened and two weeks in was adjusting prices of his sale books manually. Like, seriously, clicking through 200 items a night and entering new prices. I told him to stop that nonsense and built an automated scraper, parser and some other tools in Python that would parse the actual websites for each of our articles ISBN and compare our prices to those of the competition (this was before the days of publicly available Amazon APIs), readjust our pricing to the cent accordingly and upload the freshly generated updates once all 200 000 items were parsed.

    Orders went from 3 - 5 per day to 120 - 150 per day. My buddies were packaging books and CDs all day while I was sitting there grinning and petting my script and ama-bot setup (still those right here in my project folder :-) ). We made 700 000$ of revenue the first year. A few months in competitors started to do the same - no suprise, the concept is quite obvious to any computer or programming guy - and a ruinous price-war started. My friend went out of business a year later. We could have fine-tuned the automated price adjustments like the marketplace vendors are doing today, such as upping the price of an item only you have got in stock, but after a few bad business decisions my friend didn't want to continue. That was all back in the early 2000s (2003-2004ish).

    On the issue discussed:
    Before a Flash Crash can happen on sites like amazon marketplace, the vendors involved will either die a painfull death before or finetune their algorythims to a much more complex model. Those still alive and well today have done the latter, and even if updates occur every 15 minutes, I'd bet money that they are still watching the sales and revenue with the appropriate tools and with their own eyeballs, because you can lose thousands within minutes if you don't. You can automate a lot, but you can't automate day-to-day business decisions, especially in such markets.

    Bottom line:
    Crashes don't happen here, only individual foreclosures for those who don't watch out well enough.

    My 2 cents. .... Aaaah, the memories ...

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