Algorithmic pricing

Michael Eisen found a good example of algorithmic pricing on Amazon which resulted in two booksellers pricing a book on fly genetics at almost $24 million (via yewknee).

On the day we discovered the million dollar prices, the copy offered by bordeebook was 1.270589 times the price of the copy offered by profnath. And now the bordeebook copy was 1.270589 times profnath again. So clearly at least one of the sellers was setting their price algorithmically in response to changes in the other’s price. I continued to watch carefully and the full pattern emerged.

Once a day profnath set their price to be 0.9983 times bordeebook’s price. The prices would remain close for several hours, until bordeebook “noticed” profnath’s change and elevated their price to 1.270589 times profnath’s higher price. The pattern continued perfectly for the next week.

I’m waiting for the algorithmic pricing that messes up in the other direction and nets me a Gutenberg bible for pocket change.

Fake money saved Brazil

How Fake Money Saved Brazil examines how the country dealt with runaway inflation.

“We called it a Unit of Real Value — URV,” Bacha says. “It was virtual; it didn’t exist in fact.” People would still have and use the existing currency, the cruzeiro. But everything would be listed in URVs, the fake currency. Their wages would be listed in URVs. Taxes were in URVs. All prices were listed in URVs. And URVs were kept stable — what changed was how many cruzeiros each URV was worth.

Still, people used URVs. And after a few months, they began to see that prices in URVs were stable. Once that happened, Bacha and his buddies could declare that the virtual currency would become the country’s actual currency. It would be called the real.