The Game Theory of How Algorithms Can Drive Up Prices

Two competing businesses using computer algorithms to automatically set prices can end up charging customers high prices even without illegal coordination, according to new research. When one company uses a "no-swap-regret" algorithm that learns from past pricing decisions and another uses a random strategy favoring high prices, both businesses can profit while consumers pay more. This challenges traditional antitrust enforcement, which relies on finding evidence of direct collusion rather than algorithmic behavior that naturally leads to higher prices.