Translate in another language

#9 When Algorithms Err.

Micheal Eisen discovers how a book came to be priced at US$ 2.3 Million.

Vector images of a woman holding a laptop beside the robot. In the background, there is tubelight and leaves.
Image credit: Freepik.com

Michael Eisen wrote in 2011 about a mild price war by two sellers on a book about the flies. The Making of a Fly is a book by Peter Lawrence a developmental biologist. The book was out of print pre owned copies were available from 35.54. There were two new copies, one was priced at around US$ 1.7 Million plus a US$ 3.99 postage. The other seller was selling the book at a marginal difference of another US$ 400,000. The sellers were legitimate business entities and not people with a warped sense of humour.


Eisen checked the price the next day and the price had gone up again, both the sellers were now asking for a sum of US$ 2.3 Million for the book. The difference had come down to a mere US$ 5,000. The book ultimately peaked at around US$ 23 Million and fell the next day to a more realistic US$ 106, and US$ 134.
The two sellers were using an automated pricing strategy and the result was that without human intervention the price had climbed steeply. Though the incident is from 11 years ago, with more automated strategies everywhere and human intervention coming down we have to be extremely careful about the algorithmic systems but how do we start understanding them if we do not get to see them?
The work of Navinder Singh Sarao on algorithmic trades in 2010, the infamous flash crash wiped around US$ 1 Trillion from the US markets. This was largely due to the fact that we do not understand the behaviour implications of algo-decison making.


Great! You’ve successfully signed up.

Welcome back! You've successfully signed in.

You've successfully subscribed to IP Wave.

Success! Check your email for magic link to sign-in.

Success! Your billing info has been updated.

Your billing was not updated.