Amazon algorithms price bio book at over $23m
Drosophila melanogastic cockup
An algorithmically induced pricing spiral drove up the price for a popular biology reference work on Amazon.com to an astronomical $23.7m.
Amazon allows third-party retailers to set their prices using algorithms that take into account what other booksellers are charging for the same title. In this case, the title was The Making of a Fly by Peter Lawrence, and the Amazonian booksellers whose pricing algorithms drove its price to ludicrous levels were bordeebook and profnath.
A fine reference work, to be sure – but is it worth $23,698,655.93 plus $3.99 shipping?
According to evolutionary biologist Michael Eisen, who discovered the spiral and wrote about it on his personal blog, bordeebook and profnath employed algorithms to automatically set their prices for The Making of a Fly – which Eisen describes as "classic work in developmental biology" – based on each others' price.
"Once a day profnath set their price to be 0.9983 times bordeebook's price," Eisen writes. "The prices would remain close for several hours, until bordeebook 'noticed' profnath's change and elevated their price to 1.270589 times profnath's higher price."
These adjustments caused a seesawing effect: profnath would lower its price to slightly below that of bordeebook's, then bordeebook would bump its price up to significantly over that of profnath's. Then profnath would react, then bordeebook would respond – then profnath, then bordeebook, and so on ad infinitum.
Well, "ad $23,698,655.93", in any case.
It's not that bordeebook and profnath are either disreputable or ignorant newbies when it comes to selling books on Amazon. Both are ranked by users with four and a half out of five stars, and both have positive ratings in the mid-90 per cent range. And the two booksellers aren't small: bordeebok has over 128,000 rankings, and profnath, though significantly smaller, is no slouch at over 8,000 ratings.
"What's fascinating about all this is both the seemingly endless possibilities for both chaos and mischief," Eisen writes. "It seems impossible that we stumbled onto the only example of this kind of upward pricing spiral – all it took were two sellers adjusting their prices in response to each other by factors whose products were greater than 1."
This silliness, however, was eventually noticed – but the algorithm lives on. "The price peaked on April 18th," Eisen writes, "but on April 19th profnath’s price dropped to $106.23, and bordeebook soon followed suit to the predictable $106.23 * 1.27059 = $134.97."
As of this Tuesday, bordeebook was selling a used copy of The Making of a Fly for $956.98, despite the fact than any even-larger bookseller – any_book, with over 560,000 ratings – was selling the same book in better condition for a mere $197.67. And profnath has dropped out of the algorithmic tug o' war.
With all due respect to The Making of a Fly and its Drosophila subject matter, it appears that algorithmically managed online commerce still has a few bugs. ®
This is what happens when ordinary people get hold of algorythms. Had a customer once who did something similar with his emails, he had two computers and wanted to get all his emails on both computers. On one computer he set up a rule that all new emails get forwarded to the other computers, and yes you guessed it, he set the same rule on the other computer, and despite my explaining in sentences of two words with less than 5 letters each he simply couldn't get what he had done wrong.
He called me when his internet was groaning, the computers were sending several thousand emails to eachother every hour and he still didn't have the common snnse to delete his newly created email rules. Allowing ordinary people access to even the simplest algorythms is asking for trouble, they just don't understand them, there's logic involved!
There are some problems with your post.
That's a delightful tale, but pray tell: which are the products that are experiencing a downward spiral? I'd like to know which expensive products I can buy for just a penny thanks to such algorithmic foolishness.
On a more sensible note: doesn't Amazon allow you to specify multiple equations for your algorithmic price calculation? That way you could add a maximum and a minimum price to sell at.
isn't this false advertising though?
The trader that doesn't have it in stock and is expecting to buy it from another trader is lying about his stock status. Also my partner was flogging some dvds just this month and any price put was being undercut by pennies until both reached one p. - Sold in the end at 1p but I hadn't realised this was going on and cancelled them (about 3 in total) to which amazon in the end suspended the account for a day ????
Noticed similar nonsense going on with digital color copy A3 stock - 4 packs retailing for 12 pounds (3.23 per ream) normally retails from 25 to 50 pounds... bought as much as I could though amazon would only allow 5 per account. So created new accounts to get as much as possible. Suddenly the price started fluctuating wildly - it has now settled at 55 pounds. thing is all the other retailers were following the ride. Amazon also tried to back out of the sale saying there was a mistake but as they had made mistakes in partially dispatching all the orders (they kept sending one ream instead of 4!) then held them up to it. Many mistakes later and damaged shipments by couriers - got a couple of extra boxes free....