Algorithmic Pricing On Amazon 'Could Spark Flash Crash' 274
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.
Falling to near zero?? (Score:5, Interesting)
Re:Falling to near zero?? (Score:5, Interesting)
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.
Re:Falling to near zero?? (Score:5, Interesting)
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.
Re:Falling to near zero?? (Score:5, Informative)
I've no idea if that's even true; It just makes sense that it would happen.
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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
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Wrong, you are wrong on the facts. USA had the freest market between its Civil war and WWI. That's when USA became largest producer, exporter, creditor nation, allowed most competition, which brought everybody's standard of living up, allowed people to innovate.
USA had almost no government at all at that time period, no income taxes, no departments, pretty much nothing, and economy actually turned to be first world economy, and only 100 years before USA was 3rd world.
But not only USA, China has allowed its
Withdraw products and reintroduce them later (Score:2)
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.
Re:Falling to near zero?? (Score:4, Insightful)
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?
Re:Falling to near zero?? (Score:5, Insightful)
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.
Re:Falling to near zero?? (Score:5, Insightful)
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.
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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
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. 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.
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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.
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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
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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?
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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.
Rating and Distance (Score:2)
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.
Re:Falling to near zero?? (Score:4, Insightful)
The scenario you're describing is usually only common when there are HIGH BARRIERS TO ENTRY, which, more often than not, are CREATED BY GOVERNMENT REGULATION.
Horseshit. People who bitch about government regulation behing high barriers to entry are usually just whiny bitches who couldn't succeed in the first place. Government regulation is rarely among the most significant barriers to entry, unless you're talking about something extremely dangerous or destructive, like strip mining or nuclear power. The biggest barrier to entry is more often than not, startup capital required, and the presence of existing players who would be able to put their prices lower than yours and push you out of the market.
Re:Falling to near zero?? (Score:5, Insightful)
110,000 Independent Gas Stations (Score:4, Informative)
The gas station example is specifically not horseshit. The number of independent gas station owners dropped dramatically after a number of insane regulations that required $100K's of dollars of unnecessary retrofitting.
From the WSJ:
Until the past five years or so, many gas stations were owned by the big energy companies. But most have since sold off their portfolio of stations to focus on more profitable areas, such as wholesale fuel sales.
Since 2008, for instance, Exxon Mobil Corp has sold more than 95% of the roughly 2,000 stations it owned, and it plans to sell the rest by year-end. Chevron Corp had 491 company-owned stations at the end of 2011, down from 1,348 in 2001.
Most U.S. gas stations are owned by tens of thousands of individual operators, many of whom have one or more locations. These independent station owners typically buy their fuel from distributors for the major fuel wholesalers like Exxon Mobil and Chevron. The regional distributors own or hire tanker trucks that go from the so-called racks at gasoline terminals to storage tanks at the individual stations.
The station owners, in turn, set their gas prices for consumers so that the average markup, or gross margin, on gas is typically around 15 cents or 16 cents a gallon.
Because consumers these days use plastic even for spontaneous small purchases such as gas, snacks and smokes, the station owners say their margins are eroding.
Frank Reluzco, owner of an Exxon station, auto-repair business and convenience store in Frederick, Md., said that roughly 90% of his sales are paid by credit card today, compared with about 75% five years ago. "It costs so much to fill a tank right now; no one's going to carry around that much cash."
Increased competition from supermarkets and warehouse clubs is also a challenge. Issaquah, Wash.-based Costco Wholesale Corp added its first gas pumps alongside one of its stores in Tucson, Ariz., in 1995.
Pain at Pump Is Hitting Gas Stations [wsj.com] [April 5]
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And people like you have no real idea how much government regulations cost business.
People like us are not complaining about regulations, we're complaining about regulations that do NOTHING to prevent or mitigate the problems they supposedly are addressing.
Take for instance, "Contractor License" requirement. There is nothing a contractor's license proves, yet it is required to do business in that field. It doesn't solve the "scam" artists, it doesn't prevent shoddy craftmenship. ALL it does is serve as barr
Re:Falling to near zero?? (Score:5, Informative)
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.
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By the FINRA rules there has to be a COMPLAINT, I am talking about companies being shaken down, don't you understand? They invade the main office, they come by the dozen, go over every single paper and trail, they want to see all personal information of every client and every detail about every transaction.
Then they go to the satellite offices everywhere else, in other cities. FINRA chased so many businesses out of the market that their revenues fell so much, they had to raise fees by a factor, which will
Re:Falling to near zero?? (Score:5, Interesting)
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.
Re:Falling to near zero?? (Score:5, Informative)
Floors are good, but so are ceilings.
Amazon’s $23,698,655.93 book about flies [michaeleisen.org]
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Re:Falling to near zero?? (Score:5, Interesting)
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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)
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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
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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)
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)
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)
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.
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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.
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There has to be a way to set a minimum price, otherwise this system is too dangerous for any seller to want to use.
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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;
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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.)
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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.
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Well the viability of that all depends on:
how many alerts you generate,
how fast can the staff respond to alerts
are the staff empowered to make the decisions
is that safer than letting the computer just do it (think of abuse and fraud potential)
---
I am not pretending to know all the answers or have solutions but we are moving like it or not into a period of HFP (high frequency pricing) in E-commerce. What I can tell you is that pretending the problem is simple and not thinking about it won't solve it.
Re:Problem? (Score:5, Interesting)
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.
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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.
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If you don't want to be affected by the stock market, don't invest. Is that really what you mean to say?
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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...
Starting a company is not for everybody (Score:2)
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.
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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.
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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.
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Yes, I was rephrasing the OPs post in a way that would hilight its flaws.
Re:Problem? (Score:5, Informative)
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.
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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.
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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
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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?
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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.
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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.
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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.
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Bring it on I say (Score:3)
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?
Add an "it's not worth it" detector (Score:2)
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)
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.
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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.
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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.
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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
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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.
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Yup, and I doubt Amazon would take that lying down--instead, they would take it out on the sellers.
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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
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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)
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.
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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
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So what? (Score:5, Interesting)
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.
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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.
Re:So what? (Score:4, Interesting)
And if you do have a higher willingness to pay, then I don't see the problem.
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So you are completely fine with people being discriminated against and being fucked over. Good to know.
Re:So what? (Score:5, Informative)
That's called dynamic pricing, and Amazon did it at one point [slashdot.org].
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.
Not gonna happen (Score:2)
It sounds like a good deal for the customer (Score:5, Funny)
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.
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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
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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
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I'm curious how the seller wins in your scenario.
And how you lose.
Looks to me like he loses, and you win.
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whoosh
Is there a tool for buyers? (Score:2)
Would be nice to have a cron job that detects when the price hits 0.
Monkey business... (Score:2)
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
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Again, Amazon should punish sellers that don't honor their pricing. Simple concept. Ask eBay.
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"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.
If by third party software you mean eyeballs (Score:2)
Won't happen. Here's why: (Score:5, Interesting)
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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Go read an Austrian economics book. Speculation is useful and voluntary. It's nothing at all like gambling unless you think betting on red changes the odds that red will come up in an honest casino.
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So... speculation is gambling then. Thanks for the clarification.
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Why are economics books written by Austrians so special? Did people from Austria invent economics?
Re:Big difference. (Score:4, Informative)
In general, Austrians take only one axiom (that humans act in attempts to better their lives), while other schools of economics take several.
Additionally, Austrians recognize the inability to run full-detailed simulations of the economy which give reliable results (The Calculation Problem). I feel if I elaborate any more on the matter, I will do injustice to the Austrian school (I am rude of tongue).
If you would like to learn more about the Calculation Problem with regards to Mises and his explanation of it, I'd recommend reading about it here. [mises.org] I will affix a warning to my previous sentence, that if you are of a delicate political or economic nature, such that you cringe, despair, or evince a developed opinion with regards to the usage of words like 'Socialism', as most Americans are either for or against, you may pass over, or otherwise read the linked text with colored vision; if you are the kind of person is easily inflamed or are prone to confirmation bias, you may save yourself some time and emotional distress by avoiding the reading of the linked text.
Re:Big difference. (Score:4, Insightful)
It's also popular with Nobel Prize winners.
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Part ownership, even a small percentage, is very real. There are probably two or more partners who own the trendy cofffee shop in the artsy neighborhood from which you anonymously posted that drivel.
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Another fine lesson in Slashdot Economic Theory brought to you by the letter G and the number zero.
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True - one fix for sellers is to limit the number of items in any one campaign. Then iterate and improve.
The stock market problem is that HFT will gladly risk 100MM shares for the arbitrage, and if somehow the market evaporates, someone is holding the bag. Which brings us to this problem - despite the regulators' responsibility to, um, regulate, they are nearly always behind the curve. And the REAL problem - our legislature doesn't dare let the brokerages pay for their mistakes, since that would impact the
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Ah, did you mean
if ( new_unit_price = (unit_cost + min_margin) ) { return (unit_cost + min_margin); }
?
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I should have said:
if ( new_unit_price .LE. (unit_cost + min_margin) ) { return (unit_cost + min_margin); }