Higher frequency (book) trading: Walras, collusion, or both?

High-speed trading tools pioneered in the stock market are increasingly driving price movements on Amazon’s website as independent sellers use them to undercut and outwit each other in a cut-throat online market place.

Product prices now change as often as every 15 minutes as some of the 2m sellers on Amazon’s site join the online retailer in using computerised tools – often developed by former data miners at investment banks – to lure shoppers with the best deals.

…Amazon sellers – using third-party software – can set rules to ensure that their prices are always, for example, $1 lower than their main rival’s.

…Some sellers have even created dummy accounts with ultra-low prices to deliberately pull down those of rivals so they can corner a market by buying their goods, say pricing experts. That practice violates Amazon’s rules of conduct.

Here is more, “Amazon robo-pricing sparks fears.”

Comments

YAY! price competition! YAY

…Some sellers have even created dummy accounts with ultra-low prices to deliberately pull down those of rivals so they can corner a market by buying their goods, say pricing experts.

I assume ultra-low price purchases rarely go through. If some netizen tries one, the seller will somehow cancel the deal somewhere down the line. Such time wasters would doubtless anger Amazon; and you don't need to be a socialist to think them dishonest. But what is the money-market equivalent, and is it legal?

Financial markets usually have a transaction queue. May HFTs submit bids and then cancel them before they are executed, in order to manipulate or probe the market.

Why are HFT's allowed to indiscriminately cancel bids without penalty? Is there a downside to cracking down on the practice? What about a minimum cooling-off period before one is allowed to cancel a bid?

Amazon will block sellers who do this, there is a mechanism in place to prevent this.

@Adrian
Not necessarily. A lot of used books on Amazon sell for $0.01 , especially pulp paperbacks or books which are "out of date" (who is still reading Ross Perot's memoirs?)

Amazon sets a standard shipping rate to avoid shipping shennanigans. Since shipping does not always cost the full $3.99, it's still possible for sellers to make a profit selling for $0.01

Transactions for $0.01 books will almost always go through, though they will actually cost you $4.00

I'd be wary of assuming lowball prices aren't real.

At the moment, the link below will provide prices from $2.11 (used hardcover) to $115.79 (paperback) for Chris Ware's Acme Novelty Library [recommended]. But the $2.11 is indeed a real price: I ordered this at a similar price a few days ago and received it Friday (plus $3.99 shipping)

http://www.amazon.com/Acme-Novelty-Library-Chris-Ware/dp/0375422951/ref=sr_1_1?ie=UTF8&qid=1341840341&sr=8-1&keywords=chris+ware+acme+novelty+library

(Interestingly enough, a few hours later there are now prices at $2.06 and $2.07, versus the earlier low of $2.11 -- for an older book that is nowhere near a fast mover. So there are some games going on. Amazon itself has the book now at $6.02 (but eligible for free shipping with $25 order).

As a side note, is there a single person out there who doesn't think the internet has been a godsend to those of us who like to buy used books? (not collector's editions, just regular used books)

The internet is fantastic for all second hand goods, not just books.
I wouldn't be surprised if the vastly improved efficiency of the 2nd hand markets make a measurable difference to GDP. What % of new purchases no longer occur because it is now so easy to buy 2nd hand?

Note: This might lower measured GDP, but it reduces natural resource usage, increases net utility, and might even increase real GDP in a way that statistics (and the tax man!) find hard to track.

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