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by milesvp
975 days ago
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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. |
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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.