Within a few iterations, the programs "learn" that it's mutually beneficial to set the price just below monopoly level. This gives the impression of competitive market without the risk of accepting less profit. The researchers ran tests with more AI "competitors" which didn't change the results. All the AI programs learned to avoid competitive pricing.
Speaking as a long time computer nerd, that computers don't really learn anything. Learning implies understanding. Understanding implies a certain amount of applied intuition. A human would be able to set the price of an object based on that understanding without any data from the market and probably be able to be competitive. The AI won't ever reach that level of understanding. On the other hand the NYSE selling floor has been replaced by a server room, because AI's *can* chew through data much faster, recognize patterns in said data and initiate actions in response to those patterns. but some human with a nominal understanding of the stock market programed the pattern into it, and told it what to do through a very long If-then (and/or/) processes.
What most AI-developers are now calling 'learning' is really giving another layer, instructing it to adjust itself according to a few parameters. The only thing here is that maybe everybody's going to need AI's to shave off that few extra cents worth of profit. Keep in mind, when businesses talk about 'competitive pricing' they're not saying it's the lowest. they're saying it's the most profitable. Because there will always be those guys that go, "aha! that thingamajig costs a thousand dollars more! it MUST be better"
On 2/13/2019 at 5:05 PM, Frosty said:
If the intent is to maximize profit then isn't it basic logic different systems weigh the results of actions and adjust? Other pricing software is just another variable on the landscape to be dealt with. They interact and reach the least energy state, like any other dynamic system. Seems pretty predictable to me....
There's another intent- to generate more profit for the company using the algorithms. Enough 'more profit' that company are willing to buy their services. But yep. this is exactly what AI does.
Pricing algorithms learn to collude
in The Business Side of Blacksmithing
Posted
Speaking as a long time computer nerd, that computers don't really learn anything. Learning implies understanding. Understanding implies a certain amount of applied intuition. A human would be able to set the price of an object based on that understanding without any data from the market and probably be able to be competitive. The AI won't ever reach that level of understanding. On the other hand the NYSE selling floor has been replaced by a server room, because AI's *can* chew through data much faster, recognize patterns in said data and initiate actions in response to those patterns. but some human with a nominal understanding of the stock market programed the pattern into it, and told it what to do through a very long If-then (and/or/) processes.
What most AI-developers are now calling 'learning' is really giving another layer, instructing it to adjust itself according to a few parameters. The only thing here is that maybe everybody's going to need AI's to shave off that few extra cents worth of profit. Keep in mind, when businesses talk about 'competitive pricing' they're not saying it's the lowest. they're saying it's the most profitable. Because there will always be those guys that go, "aha! that thingamajig costs a thousand dollars more! it MUST be better"
There's another intent- to generate more profit for the company using the algorithms. Enough 'more profit' that company are willing to buy their services. But yep. this is exactly what AI does.