Thanks to online marketplaces, consumers are no longer limited to a few brick-and-morter stores to buy their holiday gifts. Now, they can order practically any item from any corner of the Earth. Surely this increased competition means better prices? Ariel Ezrachi and Maurice E. Stucke warn that this might not be so. In their provocative new book, Virtual Competition: The Promise and Perils of the Algorithm-Driven Economy, they argue that big data, game theory, and behavioural psychology has created new opportunities to fix prices and rip you off (without you knowing it). They foresee a future where algorithms dramatically inflate prices, even without being intentionally programmed to do so. Stucke and Ezrachi, two legal scholars, say that under existing legislation, algorithmically-driven price fixing would not even be illegal.
“There is just a nice facade. A nice eco-system that was created just for you. We refer to this as The Truman Show. If you remember the Truman Show, Truman lived relatively happy life in a universe that looked completely natural. Yet, it was the creation of a production company. And the only one who benefited were the producer and the company. And in many ways, in the modern era, when you go online, what you see is very much what Truman saw when he was walking in his neighbourhood.”
- Ariel Ezrachi and Maurice E. Stucke. Virtual Competition: The Promise and Perils of the Algorithm-Driven Economy. Cambridge: Harvard University Press.