July 9th, 2012
Amazon sellers – using third-party software – can set rules to ensure their prices are always, for example, $1 lower than their rivals’. More complex algorithms can analyse data to set prices most likely to secure a prominent position on the site.
But the tools create the risk of malfunctions similar to the 2010 flash crash, when algo trading was blamed for some US stock prices falling to near zero, then rebounding in 20 minutes.
Last year, out-of-control algorithms inflated the price of The Making of a Fly, a genetics book, to more than $23m, according to Michael Eisen, a biologist who blogged about it.
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