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Pricing Algorithms: Conscious Parallelism or Conscious Commitment?

Alex Okuliar, Elena Kamenir, CPI North America Column, July 2017

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Headline after headline has proclaimed the demise of bricks-and-mortar retail and the rise of the online merchant. Recent studies show that 8 out of 10 Americans now shop online, with almost half of US adults shopping online either weekly or a few times a month. The online retail environment, in addition to reshaping the physical retail landscape, also may be fundamentally changing merchant pricing behavior. Using algorithms, competitors can now identify and “scrape” pricing information and pricing deviations. In particular, pricing algorithms—which are set by computers—can be programmed to react to certain programmed parameters (e.g., competitor pricing) in setting a price. The question for antitrust enforcers has become whether these programs can cross the line from benign conscious parallelism to something more.

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