[cmiles74]

As one player raises their prices incrementally, this information is passed on to all the other players immediately. The software will then "recommend" that other players raise their rates to match. Or the software recommendations a slightly higher price to all players. With players of this size, small increases make a big difference.

[SideQuark]

As someone raises prices, sales decrease. Companies cannot simply raise prices without losing customers, in any area.

[milesvp]

This is only true when prices change slowly. If I use a computer to do my pricing, the here’s what can happen in real time.

Player A raises prices. Algorithm automatically raises everyone’s prices to the new average. Player A lowers prices to be in line with new average. everyone’s prices come down very slightly because A is now towing the line.

A was able to raise the prices of everyone before anyone can adjust their spending accordingly.

This is a real problem, and big players are going to continue to learn how to game it to the detriment of all.

BTW I’ve seen this strategy play out in online games with heavy botting. It’s funny to see there. Not funny to have potential to happen in real life.

[SideQuark]

>This is only true when prices change slowly.

There is no magic about the speed of price changes. If slow or fast price changes made a difference on amount bought, then companies would do that speed. But they don't.

Similarly, prices rising fast doesn't trick people in aggregate to ignore the increase - they still react to price increases.

This is all pretty basic econ. If this "new" system you are afraid of allowed rampant price increases, everything would cost more, yet things have not increased (except for a recent inflationary period completely predicted due to free COVID cash giveaway and Russian oil shocks).

Algorithmic price discovery lowered consumer cost in stock markets big time. It lowers risk to producers as they get up to dat information, and lower risk means lower spread required.

>A was able to raise the prices of everyone before anyone can adjust their spending accordingly.

Not "everyone" will buy at an increased level - if that were true, then the producer would raise the prices anyways. The algorithms only outprice people until those running them realize they screwed up and improve the algorithms.

>big players are going to continue to learn how to game it to the detriment of all

Again, if prices could be raised to get more profit, than that is what companies would have already done. They cannot because people take their dollars elsewhere.

>BTW I’ve seen this strategy play out in online games with heavy botting. It’s funny to see there.

And if it costs people real money, some price out and stop. Same as in reality.

[nottheengineer]

This seems like a huge problem without an easy solution. Now that grocery stores are starting to deploy electronic price tags, I don't see why they wouldn't implement exactly that.

The only ideas I have are to limit how often prices can change or mandate prices, but both of those have some huge implications and downsides.

[pcstl]

Why should everyone raise their prices?

[Jensson]

Did people buy less food after grocery stores raised prices? I doubt it. If you have something people require then you can increase prices a ton as long as you ensure everyone else also does it.

The reason this doesn't happen for groceries is that starting a grocery store is very easy, if everyone increases grocery prices a competitor with lower prices will appear extremely quickly. But for services that are harder to setup you can't do that, replacing a pharma or a chip company isn't something anyone can do even if they had lots of money.

And the reason we don't want a monopoly to set these prices is that it blocks progress. Imagine if you had to pay the maximum you'd be willing to pay for food instead of the cost it takes to produce? You'd be forced to spend most of your salary on food or ration it, that isn't a society you want to live in.

[SideQuark]

>Did people buy less food after grocery stores raised prices? I doubt it.

Yes they did. So your premise needs checked. Read any news about what happens to food sales as inflation outpaces income and it's abundantly clear stores cannot simply raise prices without losing sales. There's such easy literature to find you don't need to "doubt it" when you can simply check it. For example [1]

Some consumers purchase at the limit of what they can spend - there's no elasticity for them.

[1] https://ajph.aphapublications.org/doi/full/10.2105/AJPH.2008...

[danaris]

> The reason this doesn't happen for groceries is that starting a grocery store is very easy, if everyone increases grocery prices a competitor with lower prices will appear extremely quickly.

But a) it is not clear that this is, in fact, true at this point in time, and b) even if it is, "extremely quickly" is still going to be on the order of a year or two.

The reason I say (a) is because the existing grocery store chains are very large, and very willing to lower prices locally to prevent a competitor from getting an edge on them. They also have significant economies of scale that allow them to drop prices lower than a new local upstart could and still make at least some profit.

In short, the barriers to entry are high enough that a few months of raised prices aren't enough to cause a competitor to appear out of nowhere, and any would-be competitor would need to either have massive resiliency to outlast the incumbents undercutting them (again, locally, such that it wouldn't make a blip in the overall inflation numbers), or somehow start up enough locations all at once that such an undercutting attack would be less feasible and much more visible.

[cmiles74]

This is the problem with all players raising prices to the same rate at nearly the same time. There are simply no alternatives and people need to pay the higher price. That's kind of the whole point of the article.

[SideQuark]

The point of the article is to get views. If it were a decent study of facts, it would be better as a peer reviewed article. But it wouldn't stand up to that scrutiny, due to the fact that in such fake collusion any player can gain by breaking the pact.

Even OPEC cannot keep all their members in check to set oil prices - countries routinely undercut them to sell more oil. This has been demonstrated time and time again in industries where people claim long term widespread collusion - such things don't last long.

[srean]

> As someone raises prices, sales decrease

Not if the product is controlled by an explicit or an implicit cartel. The point being made is that cross company pricing services leads to an implicit and deniable cartelization.

[ikekkdcjkfke]

Don't the grocery stores usually have toght integration with the supply chain

[quantified]

Unless they all raise together. That's the collusion.

[angmarsbane]

You can do it for a long time as long as consumers have easy access to cheap debt.