Collusion by Algorithm: Does Better Demand Prediction Facilitate Coordination Between Sellers?
© 2019 INFORMS. We build a game-theoretic model to examine how better demand forecasting resulting from algorithms, machine learning, and artificial intelligence affects the sustainability of collusion in an industry. We find that, although better forecasting allows colluding firms to better tailor...
| Main Authors: | , |
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| Other Authors: | |
| Format: | Article |
| Language: | English |
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Institute for Operations Research and the Management Sciences (INFORMS)
2021
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| Online Access: | https://hdl.handle.net/1721.1/134402 |
| _version_ | 1811094540270960640 |
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| author | Miklós-Thal, Jeanine Tucker, Catherine |
| author2 | Sloan School of Management |
| author_facet | Sloan School of Management Miklós-Thal, Jeanine Tucker, Catherine |
| author_sort | Miklós-Thal, Jeanine |
| collection | MIT |
| description | © 2019 INFORMS. We build a game-theoretic model to examine how better demand forecasting resulting from algorithms, machine learning, and artificial intelligence affects the sustainability of collusion in an industry. We find that, although better forecasting allows colluding firms to better tailor prices to demand conditions, it also increases each firm's temptation to deviate to a lower price in time periods of high predicted demand. Overall, our research suggests that, despite concerns expressed by policy makers, better forecasting and algorithms can lead to lower prices and higher consumer surplus. |
| first_indexed | 2024-09-23T16:01:48Z |
| format | Article |
| id | mit-1721.1/134402 |
| institution | Massachusetts Institute of Technology |
| language | English |
| last_indexed | 2024-09-23T16:01:48Z |
| publishDate | 2021 |
| publisher | Institute for Operations Research and the Management Sciences (INFORMS) |
| record_format | dspace |
| spelling | mit-1721.1/1344022023-02-22T17:01:01Z Collusion by Algorithm: Does Better Demand Prediction Facilitate Coordination Between Sellers? Miklós-Thal, Jeanine Tucker, Catherine Sloan School of Management © 2019 INFORMS. We build a game-theoretic model to examine how better demand forecasting resulting from algorithms, machine learning, and artificial intelligence affects the sustainability of collusion in an industry. We find that, although better forecasting allows colluding firms to better tailor prices to demand conditions, it also increases each firm's temptation to deviate to a lower price in time periods of high predicted demand. Overall, our research suggests that, despite concerns expressed by policy makers, better forecasting and algorithms can lead to lower prices and higher consumer surplus. 2021-10-27T20:04:51Z 2021-10-27T20:04:51Z 2019 2021-04-09T14:56:18Z Article http://purl.org/eprint/type/JournalArticle https://hdl.handle.net/1721.1/134402 en 10.1287/MNSC.2019.3287 Management Science Creative Commons Attribution-Noncommercial-Share Alike http://creativecommons.org/licenses/by-nc-sa/4.0/ application/pdf Institute for Operations Research and the Management Sciences (INFORMS) SSRN |
| spellingShingle | Miklós-Thal, Jeanine Tucker, Catherine Collusion by Algorithm: Does Better Demand Prediction Facilitate Coordination Between Sellers? |
| title | Collusion by Algorithm: Does Better Demand Prediction Facilitate Coordination Between Sellers? |
| title_full | Collusion by Algorithm: Does Better Demand Prediction Facilitate Coordination Between Sellers? |
| title_fullStr | Collusion by Algorithm: Does Better Demand Prediction Facilitate Coordination Between Sellers? |
| title_full_unstemmed | Collusion by Algorithm: Does Better Demand Prediction Facilitate Coordination Between Sellers? |
| title_short | Collusion by Algorithm: Does Better Demand Prediction Facilitate Coordination Between Sellers? |
| title_sort | collusion by algorithm does better demand prediction facilitate coordination between sellers |
| url | https://hdl.handle.net/1721.1/134402 |
| work_keys_str_mv | AT miklosthaljeanine collusionbyalgorithmdoesbetterdemandpredictionfacilitatecoordinationbetweensellers AT tuckercatherine collusionbyalgorithmdoesbetterdemandpredictionfacilitatecoordinationbetweensellers |