Sophisticated computer algorithms used to set prices in online marketplaces put consumers at risk of collusion among sellers, according to a study published today in Nature Machine Intelligence from computer scientists at the Oxford Internet Institute and Imperial College.
Widespread use of intelligent algorithmics and dynamic pricing by online retailers, puts the public at risk of ‘adversarial collusion’, maintains Dr Luc Rocher, lead author of ‘Adversarial Competition and Collusion in Algorithmic Markets’. The research, published in the journal Nature Machine Intelligence, explains the risks from ‘adversarial collusion’, an anti-competitive practice whereby one dominant firm can manipulate other sellers which have weaker pricing algorithms.
Co-authored by Imperial’s Dr Arnaud J. Tournier and Professor Yves-Alexandre de Montjoye, it highlights how such ‘adversarial collusion’ can have negative consequences for consumers, enabling participating firms to coordinate their prices and potentially increase their profits at the expense of consumers.
Dr Rocher says, ‘Online commerce is increasingly dominated by digital marketplaces. Facilitated by digital technologies, retailers now compete globally on these platforms. To keep up with the competition, sellers use sophisticated algorithms to set prices and respond in real time to competitors’ prices.’ He continues, ‘Our research highlights how intelligent machine learning algorithms could find vulnerabilities in the system. More sophisticated algorithms can manipulate weaker algorithms and therefore collude together to increase prices for everyone.’
Senior author Professor de Montjoye adds, ‘Adversarial collusion raises new regulatory and enforcement questions. Our results emphasise the need for regulatory agencies in the UK, US, and European Union to consider how adversarial algorithmic pricing mechanisms could subtly undermine the competitiveness of online markets and harm consumers. We believe further study is needed with academics and policymakers working together to try to address these important issues for the wider benefit of society.’
The researchers call for policymakers and regulatory agencies to consider adversarial manipulations of algorithmic pricing and suggest such collusion might fall outside of the scope of current competition laws or enforcement priorities.
Notes for editors:
The full article, ‘Adversarial Competition and Collusion in Algorithmic Markets’, Luc Rocher, Arnaud J. Tournier and Yves-Alexandre de Montjoye, is published in the journal Nature Machine Intelligence where the peer review details can be seen. Dr Luc Rocher acknowledges support from EPSRC (EP/W016419/1). Dr Arnaud J. Tournier and Prof. Yves-Alexandre de Montjoye acknowledge that they received no funding in support for this research. The authors declare that they have no competing interests.
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About the OII
The Oxford Internet Institute (OII) is a multidisciplinary research and teaching department of the University of Oxford, dedicated to the social science of the Internet. Drawing from many different disciplines, the OII works to understand how individual and collective behaviour online shapes our social, economic and political world. Since its founding in 2001, research from the OII has had a significant impact on policy debate, formulation and implementation around the globe, as well as a secondary impact on people’s wellbeing, safety and understanding. Drawing on many different disciplines, the OII takes a combined approach to tackling society’s big questions, with the aim of positively shaping the development of the digital world for the public good. https://www.oii.ox.ac.uk/
About Imperial College London’s Data Science Institute
The Data Science Institute (DSI) at Imperial College London is dedicated to advancing research and building community in the exciting interdisciplinary field of data science, the integrative fusion of mathematics, statistics, and computer science applied to address basic and practical problems in the sciences (natural, life, and social), engineering, and society writ broadly. The DSI was founded as one of the seven Global Institutes of Imperial College London and hosts researchers and students conducting their own academic research on a range of topics in areas such as biomedical informatics, data learning, data visualisation and computational privacy. The unifying theme of the research at the DSI is the pursuit of innovations for building, exploring, and exploiting modern data sets—that is, large data sets created from disparate sources and types of data through novel curation, transformation, machine learning techniques, and theoretical and practical insights from problem domains.