"Competition is for losers"

July 8, 2024 12:04 AM

These new pricing intermediaries are similar to ATPCO, but don’t just act as information exchanges between competitors. They actually set the prices for an entire industry by using machine-learning algorithms and artificial intelligence, which are programmed to maximize profits. To arrive at optimal prices, these software applications aggregate vast amounts of relevant market data, some of which is public and much of which is competitively sensitive information given to them by their clients. Each algorithmic scheme has its own distinct features, but they all share the same underlying philosophy: Competing on price in an open market is a race to the bottom, so why not instead coordinate together to grow industry’s profits? from Three Algorithms in a Room [The American Prospect; ungated]
posted by chavenet (2 comments total)

the outlink saying monopolies are good hits a paywall.
posted by HearHere at 1:32 AM on July 8

The Prospect here builds on its previous analysis of Agri Stats reducing competition between Big Four meat processors, which it also ties back to the 1994 Airline Tariff Publishing settlement, showing how RealPage similarly reduces competition among property managers, raising both rents and vacancy rates and keeping people out of housing. The article is specifically about oligopolies-cum-cartels using third parties to do the dirty work of setting and inflating prices across the industry and particularly how machine learning algorithms now demand heightened enforcement.

I wish I'd seen this when it was published last month. In my commentary to the Department of Insurance, I had not thought to mention that the various AI vendors now clamoring to incorporate proprietary third-party modeling into ratemaking would eventually merge or form a cartel of their own, creating a single model to overstate risk and inflate premiums. Glad to have seen the Prospect article now. Thanks for posting.
posted by backwoods at 4:14 AM on July 8