There are examples in many markets, here is a well-researched example that comes to mind: https://economics.yale.edu/sites/default/files/clark_acex_ja...

This paper discusses how algorithmic pricing produces outcomes that are equivalent to collusion-based pricing in the German gasoline market.

Recent experiences with grocery pricing across North America and Europe look very similar to me. I know some computer scientists who have worked with major grocery retailers to implement fairly sophisticated automatic pricing tools. The goals they work towards are typically fairly simple metrics, like average spend. Even though the goal isn't to gouge consumers, it's easy to see how how this might be the unintended result.

Grocery stores especially have 1% or 2% profit margins, so logically, the things they sell must be priced as low as they can. And also why a mom and pop grocery store cannot compete with Walmart/Kroger/Costco/Target/etc, you need those huge economies of scale otherwise your prices will be uncompetitive.

Now ask yourself, why doesn't the cheaper store offer those things? Maybe because they costs something?

1. Individual price discrepancies of "10-30% or more" doesn't really matter. What does matter is overall markups.

2. The stores themselves might be upscale/higher tier, which also makes their stuff more expensive. I'm not talking about whole foods carrying organic products, I'm talking about stores that have better selection, full service butcher/deli, better cleaning, better interior design/decoration, or better location (richer neighborhood).

Your other option is assuming there is industry wide financial reporting fraud across multiple businesses and multiple countries for many decades.

Stores have different costs due to selling:

1) different quality of goods

2) employing different quality/quantity of workers

3) different locations having different real estate/insurance/tax/labor costs

4) offering fewer or more services/products

Etc.

https://www.macrotrends.net/stocks/charts/KR/kroger/profit-m...

Furthermore, we now have an economy in which many so-called industries have a single-winner or have a race to become the single-winner now in progress. So just about every firm that advertises is paying uncompetitive rates for eyeballs in the media markets, every firm that accepts credit cards paying uncompetitive rates for payment processing, and seemingly every firm that wants to have more control over its pricing is paying exorbitant executive compensation for those who are supposed to bring that about. If the firm is at all profitable, the customers pay for all of that, too.

This does not make any accounting sense. Profit (net income) is not a function equity, and what if the prior owners lost money on the investment?

Also, what intangibles are you referring to in a grocery business? The buildings, real estate, supplies etc are all tangibles.

This makes no sense.

If I own an asset worth X and sell it for X, I made zero profit. Paying shareholders to buy them out is not all profit, it's trading one asset for another.

Next, these deals are rarely simply cash giveaways, but include all sorts of other asset trades (stock in new company, payment over time... etc), also not being simply magic pure profit. Next, they're not simply taken out of one year's profits, but are generally financed by taking on more debt, so this is not some way to hide or reduce profits.

>we now have an economy in which many so-called industries have a single-winner or have a race to become the single-winner now in progress.

This is simply untrue. Pretty much every industry has lots of players. And there's constant churn. There's nearly zero product categories I cannot shop between many sellers.

The larges US banks have under 20% share, and there's literally thousands of banks.

The largest US grocery by dollar share include: Walmart 18%, Kroger 8.8%, Costco 6.4%, Albertson 6.4%, Delhaize 4.3%, Publix 3.7, Sams Club 3.6, Target 2.4, and literally hundreds more.

The same pattern of the largest company follows in pretty much every industry.

So pick some industries where you think there's a single winner that make up a decent amount of consumer sales and list them. I don't think you'll find any.

The reason this doesn't happen for groceries is that starting a grocery store is very easy, if everyone increases grocery prices a competitor with lower prices will appear extremely quickly. But for services that are harder to setup you can't do that, replacing a pharma or a chip company isn't something anyone can do even if they had lots of money.

And the reason we don't want a monopoly to set these prices is that it blocks progress. Imagine if you had to pay the maximum you'd be willing to pay for food instead of the cost it takes to produce? You'd be forced to spend most of your salary on food or ration it, that isn't a society you want to live in.

But a) it is not clear that this is, in fact, true at this point in time, and b) even if it is, "extremely quickly" is still going to be on the order of a year or two.

The reason I say (a) is because the existing grocery store chains are very large, and very willing to lower prices locally to prevent a competitor from getting an edge on them. They also have significant economies of scale that allow them to drop prices lower than a new local upstart could and still make at least some profit.

In short, the barriers to entry are high enough that a few months of raised prices aren't enough to cause a competitor to appear out of nowhere, and any would-be competitor would need to either have massive resiliency to outlast the incumbents undercutting them (again, locally, such that it wouldn't make a blip in the overall inflation numbers), or somehow start up enough locations all at once that such an undercutting attack would be less feasible and much more visible.

Yes they did. So your premise needs checked. Read any news about what happens to food sales as inflation outpaces income and it's abundantly clear stores cannot simply raise prices without losing sales. There's such easy literature to find you don't need to "doubt it" when you can simply check it. For example [1]

Some consumers purchase at the limit of what they can spend - there's no elasticity for them.

[1] https://ajph.aphapublications.org/doi/full/10.2105/AJPH.2008...

Even OPEC cannot keep all their members in check to set oil prices - countries routinely undercut them to sell more oil. This has been demonstrated time and time again in industries where people claim long term widespread collusion - such things don't last long.

Player A raises prices. Algorithm automatically raises everyone’s prices to the new average. Player A lowers prices to be in line with new average. everyone’s prices come down very slightly because A is now towing the line.

A was able to raise the prices of everyone before anyone can adjust their spending accordingly.

This is a real problem, and big players are going to continue to learn how to game it to the detriment of all.

BTW I’ve seen this strategy play out in online games with heavy botting. It’s funny to see there. Not funny to have potential to happen in real life.

The only ideas I have are to limit how often prices can change or mandate prices, but both of those have some huge implications and downsides.

There is no magic about the speed of price changes. If slow or fast price changes made a difference on amount bought, then companies would do that speed. But they don't.

Similarly, prices rising fast doesn't trick people in aggregate to ignore the increase - they still react to price increases.

This is all pretty basic econ. If this "new" system you are afraid of allowed rampant price increases, everything would cost more, yet things have not increased (except for a recent inflationary period completely predicted due to free COVID cash giveaway and Russian oil shocks).

Algorithmic price discovery lowered consumer cost in stock markets big time. It lowers risk to producers as they get up to dat information, and lower risk means lower spread required.

>A was able to raise the prices of everyone before anyone can adjust their spending accordingly.

Not "everyone" will buy at an increased level - if that were true, then the producer would raise the prices anyways. The algorithms only outprice people until those running them realize they screwed up and improve the algorithms.

>big players are going to continue to learn how to game it to the detriment of all

Again, if prices could be raised to get more profit, than that is what companies would have already done. They cannot because people take their dollars elsewhere.

>BTW I’ve seen this strategy play out in online games with heavy botting. It’s funny to see there.

And if it costs people real money, some price out and stop. Same as in reality.

Not if the product is controlled by an explicit or an implicit cartel. The point being made is that cross company pricing services leads to an implicit and deniable cartelization.

All purchases (wholesale, retail, whatever) are actually auctions, and they remain auctions even if you aren't aware that they are. So if someone was saying to themselves "Dammit, Kroger sells lettuce so high, I could that I could sell it for 4% over cost and still be 20¢ cheaper!" then they are deluding themselves. Ignore the overhead of opening a nationwide chain and all that other stuff.

When they go to purchase lettuce wholesale, as a new competitor, more lettuce doesn't pop up in the fields instantly. Or even quickly. So you end up causing wholesale prices to rise, at least until the agricultural sector catches up, if it does. They were always careful to grow just enough that none of it ends up unsold. Even if you could source it, likely you're getting the lower quality lots (the stuff Walmart goes after just so they can have theirs priced a pennty cheaper, that turns slimy 24 hours after putting it in your fridge).

This discourages new entrants, competitors. And gives Kroger some slack if someone does try to decide it.

It is a market. However much they grow, exactly that much will end up sold. They'll drop the price if there is unsold inventory to sell it.

They can't be doing a physical estimate of how much lettuce people eat. If there was any variance at all in how much lettuce gets eaten (which there is) then there'd be constant lettuce shortages where the shelves were empty. That doesn't happen, so we can tell that they are using price signals to control how much gets sold.

But, assuming there is room to go lower, then the market isn't yet competitive and has room for someone to swoop in and take the spoils. If there is some regulatory barrier that is preventing that, then there was no illusions of it being competitive in the first place.

It is not that difficult to try. In fact, many restaurants tried turning into grocery stores during COVID-19 shutdowns. Realistically, succeeding is going to be nigh impossible, though, as there is not much you can compete on. You are not going to be able to sell the product for less.

You are right that this is not bound by a regulatory barrier, but it is limited by the market barrier that was also spoken to in the previous comment.

https://news.ycombinator.com/item?id=37869309

Is it possible businesses are colluding resulting in increased profit margins? Obviously.

But we have publicly listed companies with public financials showing non material increases, or even decreases, in profit margin. Which means those businesses are just increasing prices to cover their own increasing cost of goods sold.

As the ostensible computer scientists in the room. Sitting back and not pointing out that there exist "monopoly pricing indirection mechanisms" implemented as businesses is really failing to do one's moral and ethical responsibility.

And yet the empirical evidence is not there due to nonexistent profit margins.

Because it is of course completely obvious that collusion among very large, very complex competing entities is a very easy proposition, you just need a magic algorithm to do it! /s

When all else is equal, the preference for sellers is to charge the same price a monopolist would choose (assume temporary price excursions don't have long-term ramifications like brand loyalty, and assume that "all else equal" extends far enough that competitors would also drop prices to match to avoid greatly reduced sales).

Realish-time updates, apparently with very simplistic rules, seem to converge near that price point, and the inequalities of various sellers seem to not matter much (because there aren't many, because they average out, because they don't impact price preferences much, ....)

In this case, this apparent “coordination” worked out in my favor, but the same mechanism could easily be used to raise prices. Either way, if such a mechanism exists, it is troubling.

How are you missing the subtle shift that makes this not the same?

If I ran a bakery, say, in New York City in 1900, I could send a boy around to the nearest five bakeries and get answers within an hour. That would be "real time" within that context, in the sense that customers would not respond faster than I could gather the information.

If I ran a stall at a market in, say, 1500s England, selling potatoes, I would know what price my competitors were selling potatoes for, faster even than an hour.

If I ran a gas station at an intersection, I could see at a glance what price my competitor across the street is displaying.

With current stock market tools, I can see the backlog of both buy and sell orders.

When I go to sell a house, my agent tells me the asking prices of comparable houses that are currently for sale, as well as the actual selling prices of comparable houses that have recently sold.

This is how markets are. Sellers know each others' prices.

So the only thing different is your "grabbing coffee afterwards" claim, and so far, I have seen nothing of substance to back it.

The same thing has happened in many markets. Quicker information results in more accurate pricing and lower risk, which translates into efficiency and less dead weight loss.

More accurate prices for suppliers means they can produce with less capital risk, which is generally also good for consumers since the consumers don't have to pay more to give the supplier as large a safety cushion. This has been historically true, it's basic economics, and it's empirically true in the literature.

Think if you produce a product, and there's a lot of risk in your supply chain. You need to charge more for your end product to account for that risk. This can be and is measured.

Remove risk (whether it's credit, inflation, pricing, stability, etc.), and the supplier has less risk.

This is never purely going to profits, since your competitors generally also have the same risk landscape. So any gains perhaps help profits, but some are also used in other sectors of the business - selling cheaper to try and grab market share, better wages to attract better employees, and so on.

> if the competitors can lower it nearly at the same time and you get negligeable additional sales

If you and all your competitors lower prices then likely more of the entire sector of products makes more sales as more people can afford the product. This has been the pattern since the original Luddites - when textile prices dropped from automation the entire sector exploded and produced around 10x as many goods. This too has been the pattern across history and industries.