When AI's set Prices
Nowadays, AI is used by companies to decide the price of goods and how/when to vary them. With no humans in the equation, this should avoid “price collusion”, right? (That’s legal speak for competing companies working together to keep prices higher than they would have been otherwise). Economists played off some of the AI algorithms against each other in a simulated environment. Guess what? The shape of the graph of prices over time matches what you’d see if price collusion is being practiced! Worse, the study found that this pattern occurs even with different AI’s in the mix: “Even when the active firms are three or four in number, when they are asymmetric, and when they operate in a stochastic environment.” And here’s the kicker. Guess what shows up in the logs the AI’s create of their activities, which could be used later by regulators to check for collusion? “What is most worrying is that the algorithms leave no trace of concerted action – they learn to collude pure...