How Concerned Should We Be About Algorithmic Tacit Collusion? Comments on Calvano et al.

4 Pages Posted: 22 Oct 2019

See all articles by Ai Deng

Ai Deng

Charles River Associates; Johns Hopkins University

Date Written: October 11, 2019

Abstract

A recent study by four economists (Calvano et al, 2019) has undoubtedly refueled the public and academic interest in algorithmic tacit collusion. In this study, the researchers find that their “algorithms consistently learn to charge supra-competitive prices, without communicating with one another… this finding is robust to asymmetries in cost or demand, changes in the number of players, and various forms of uncertainty.” Not surprisingly, this research has since been reported in a number of outlets including the Wall Street Journal, Financial Times, MIT Tech Review, among others. What does the study say about the likelihood of algorithmic collusion in the real world? Does it fundamentally change how we should think about tacit collusion in general? These are the questions I address in this note.

Keywords: Algorithmic collusion; Tacit collusion; Artificial Intelligence

JEL Classification: D4; L4

Suggested Citation

Deng, Ai, How Concerned Should We Be About Algorithmic Tacit Collusion? Comments on Calvano et al. (October 11, 2019). Available at SSRN: https://ssrn.com/abstract=3467923 or http://dx.doi.org/10.2139/ssrn.3467923

Ai Deng (Contact Author)

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