סמינר באסטרטגיה וכלכלת עסקים
Artificial Intelligence, Algorithmic Pricing and Collusion (the abstract can be found below)
Speaker: Emilio Calvano (University of Bologna)
Increasingly, pricing algorithms are supplanting human decision makers in on-line markets. To analyze the possible consequences, we study experimentally the behavior of algorithms powered by Artificial Intelligence (Q-learning) in a workhorse oligopoly model of repeated price competition. We find that the algorithms consistently learn to charge supra-competitive prices, without communicating with one another. The high prices are sustained by classical collusive strategies with a finite phase of punishment followed by a gradual return to cooperation. This finding is robust to asymmetries in cost or demand, changes in the number of players, and various forms of uncertainty.