The $23,698,655.93 Book

A post-doctoral student at UC Berkeley wanted to buy a copy of Peter Lawrence’s The Making of a Fly so did like a lot of people do and went to Amazon.

There he found it on sale for $35.54 to $1,730,045.91 (plus shipping).

What gives?

Michael Eisen explains:

On the day we discovered the million dollar prices, the copy offered by bordeebook was 1.270589 times the price of the copy offered by profnath. And now the bordeebook copy was 1.270589 times profnath again. So clearly at least one of the sellers was setting their price algorithmically in response to changes in the other’s price. I continued to watch carefully and the full pattern emerged.

Once a day profnath set their price to be 0.9983 times bordeebook’s price. 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. The pattern continued perfectly for the next week…

…As I amusedly watched the price rise every day, I learned that Amazon retailers are increasingly using algorithmic pricing (something Amazon itself does on a large scale), with a number of companies offering pricing algorithms/services to retailers. Both profnath and bordeebook were clearly using automatic pricing – employing algorithms that didn’t have a built-in sanity check on the prices they produced. But the two retailers were clearly employing different strategies.

Closing price before the “mistake” was found: $23,698,655.93. 

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