Europe UK (Commonwealth Union) – A recent study conducted by the Oxford Internet Institute and Imperial College has found that a sophisticated computer algorithms applied to determine prices in online marketplaces puts consumers at risk of collaboration among sellers.
The universal application of intelligent algorithmics along with dynamic pricing by online retailers, may lead to the public facing threats of ‘adversarial collusion’, as indicated by Dr Luc Rocher, lead author of the paper, ‘Adversarial Competition and Collusion in Algorithmic Markets’.
The Co-authors included Dr Arnaud J. Tournier and Professor Yves-Alexandre de Montjoye, of Imperial College where the study highlights the way ‘adversarial collusion’ can lead to negative effects for consumers, making it possible for participating firms to coordinate their rates and possibly raise their profits at the consumers’ expense.
“Online commerce is increasingly dominated by digital marketplaces. Facilitated by digital technologies, retailers now compete globally on these platforms. To keep up with the competition, sellers use sophisticated algorithms to set prices and respond in real time to competitors’ prices,” said Dr Rocher.
“Our research highlights how intelligent machine learning algorithms could find vulnerabilities in the system. More sophisticated algorithms can manipulate weaker algorithms and therefore collude together to increase prices for everyone.”
Professor de Montjoye, a senior author, indicated that the ‘Adversarial collusion brings about new regulatory as well as enforcement questions. their results emphasize the requirement for regulatory agencies in the UK, US, and European Union to take into account the way adversarial algorithmic pricing mechanisms could subtly hinder the competitiveness of online markets and become an issue for consumers.
He further indicated that they believe more research is required with academics and policymakers working collaboration to attempt to tackle these significant issues for the greater good of the community.
Researchers called on policymakers and regulatory agencies to take into account adversarial manipulations of algorithmic pricing and indicated such collusion may fall outside of the scope of the present competition laws or enforcement priorities.
