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Many sellers operating in digital platforms (like Amazon) nowadays rely on artificial intelligence algorithms to set their prices and adjust them over time. I wonder whether there is a sense in the literature about which classes (the majority of) these algorithms fall in: reinforcement learning? Regret minimisation? Is there anything (well) established in the literature about this?

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  • $\begingroup$ Are you looking for references from economics literature? I doubt such algorithm design is economics. This question may be better suited for Data Science stackexchange. $\endgroup$
    – Dayne
    Commented Feb 22, 2022 at 8:07
  • $\begingroup$ Do you refer to 3rd party sellers on Amazon or 1P? $\endgroup$
    – AKdemy
    Commented Feb 22, 2022 at 17:34
  • $\begingroup$ Both, but primarily to 3rd party sellers $\endgroup$
    – Star
    Commented Feb 22, 2022 at 17:42
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    $\begingroup$ OK, I think the main goal for them is to get into the buy box as about 80% of sales happen there. Most will rely on other firms to help them get there. I am not sure about details on methods they use but it will almost certainly focus on trying to figure out how AMZN ranks it into the buy box. For Amazon it's difficult to get details (like for any big tech firm). I don't work in that field, so cannot comment much. I wish you all the best for finding details. Interesting topic. $\endgroup$
    – AKdemy
    Commented Feb 22, 2022 at 18:00
  • $\begingroup$ Do you have any evidence to support the claim made in the first sentence of your question? I doubt that it's true. $\endgroup$
    – Mick
    Commented Feb 25, 2022 at 10:41

1 Answer 1

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If you are looking for the econ literature:

  • Calvano, E., Calzolari, G., Denicolo, V., & Pastorello, S. (2020). Artificial intelligence, algorithmic pricing, and collusion. American Economic Review, 110(10), 3267-97.
  • Klein, T. (2021). Autonomous algorithmic collusion: Q‐learning under sequential pricing. The RAND Journal of Economics, 52(3), 538-558.
  • Calvano, E., Calzolari, G., Denicolò, V., & Pastorello, S. (2019). Algorithmic pricing what implications for competition policy?. Review of industrial organization, 55(1), 155-171.
  • Brown, Z. Y., & MacKay, A. (2021). Competition in pricing algorithms (No. w28860). National Bureau of Economic Research.
  • Hansen, K. T., Misra, K., & Pai, M. M. (2021). Frontiers: Algorithmic collusion: Supra-competitive prices via independent algorithms. Marketing Science, 40(1), 1-12.
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  • $\begingroup$ I know three of these papers and I think they are theoretical: they are not about currently used algorithms, but the potential consequences of using some types of algorithms. None of them offers a survey on what class most of the actually used algorithms fall into. Could you please edit some relevant quotes into your answer? Or is this just cynical bounty hunting ;) $\endgroup$
    – Giskard
    Commented Feb 26, 2022 at 10:08
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    $\begingroup$ @Giskard Now at least someone next who tries to answer knows that these don't help. ;) $\endgroup$ Commented Feb 26, 2022 at 10:15
  • $\begingroup$ Okay! (-1) Seems like this information came from my comment though, not the answer, which does not seem useful. $\endgroup$
    – Giskard
    Commented Feb 26, 2022 at 10:18

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