Via Brad Delong, we are brought the story of competing used-book sellers who both used a pricing algorithm to try to beat the competition (though not in the same way):
...logged on to Amazon to buy the lab an extra copy of Peter Lawrence’s The Making of a Fly – a classic work in developmental biology that we – and most other Drosophila developmental biologists – consult regularly. The book, published in 1992, is out of print. But Amazon listed 17 copies for sale: 15 used from $35.54, and 2 new from $1,730,045.91 (+$3.99 shipping).
It topped out over $23 million before somebody noticed and turned off their algorithm. The sad, and funny, part is that the seller who turned off their algorithm is the one who may have been competent. Their algorithm was setting the price below that of the competition - if they were smart enough to put in a lower limit, then they didn't do anything particularly dumb. (Remembering that other people can be idiots is all too often above and beyond the call of duty.)
The other seller, though, used an algorithm that would set the price above that of the competition...and clearly did not put in a maximum allowed price, leading to the spiraling prices.
Part of what probably happened here is that at least one if not both sellers thought they were the only ones smart enough to employ an algorithm to set prices. Well, they were partly right, I suppose...
If the process had been allowed to go on long enough, it might have been even more fun! Depending on the languages used to write the algorithms, the variable types, etc. and whether or not care was being taken (not to mention the range of values Amazon will accept*), one or both prices might some day have gone to "Overflow Error", "NaN", or even flipped negative!
*We've already learned that Amazon thinks its Marketplace sellers might be selling things for over $20 million. Doesn't seem very likely, does it?
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