Here's a new concept to worry about, if you don't have enough on your plate — "algorithmic collusion."
Algorithmic collusion, simply put, is the intentional or unintentional collaboration by companies doing business on the internet to keep prices higher, using the automation of algorithms.
In this, they are behaving like a digital version of a classic cartel, which the dictionary defines as "an association of manufacturers or suppliers with the purpose of maintaining prices at a high level and restricting competition."
Artificial intelligence, machine learning and deep learning (machine learning on steroids) can be used for purposes that enhance market competition or are anti-competitive, wrote Antonio Capobianco of the Organization for Economic Cooperation and Development in a January paper titled "Digital Cartels and Algorithms."
Positive examples of commercial algorithms are legion: supply-chain optimization; targeted ads; recommendations; product customization; dynamic pricing; price differentiation, and fraud prevention. Anti-competitive algorithms include bias in favor of incumbents' products and collusion with competitors.
Algorithms can be used for collusion in setting prices for essentially identical goods, such as gasoline at the pump or airline tickets.
The critical factors are transparency — how easy it is to identify pricing changes by competitors — and frequency of interaction.
Here are three scenarios: