
Amazon’s $23,698,655.93 book about flies - rflrob
http://www.michaeleisen.org/blog/?p=358
======
siegler
A similar thing happened to me as a seller. I saw that one of my old textbooks
was selling for a nice price, so I listed it along with two other used copies.
I priced it $1 cheaper than the lowest price offered, but within an hour both
sellers had changed their prices to $.01 and $.02 cheaper than mine. I reduced
it two times more by $1, and each time they beat my price by a cent or two. So
what I did was reduce my price by a few dollars every hour for one day until
everybody was priced under $5. Then I bought their books and changed my price
back.

~~~
naner
You could turn this into a book business. List books for sale that you don't
own and this other publisher does own. Reduce the price over time until it is
super cheap. Buy while it is low and resell it without the competition.

~~~
RyanKearney
Risky. What if someone buys it? I mean, you could at least have a few books
ready to ship out just in case.

~~~
muyuu
Not really that risky. If it was a naked call like in markets, then it would
be really risky, but in this case you risk very little since there is no
contractual obligation to send the actual book if you can't get it. You can
reimburse and call it a day.

The calculations would have to consider the probability of not getting the
book under the price of sale, the probability of not getting it over price of
sale (investing the difference in avoiding a bad rating), and the chance that
you won't receive a bad rating just for reimbursing it under whatever excuse.
You can also ponder taking a bad rate eventually.

In other markets you'd have to basically get the book at any cost, which would
make it really risky.

~~~
morphogenesis
And in fact, in used book "arbitrage", the seller always has a very, very good
excuse, which is that s/he "sold the book already" to someone in s/her
imaginary brick-and-mortar store.

------
anigbrowl
This explains a lot. I wrote a small book back in the 90s that had few sales
and was unlamented when it fell out of print. A couple of years ago saw it as
the subject of an amazon.com sidebar ad and was astonished to find that it was
listed at $100 or thereabouts, and couldn't imagine how or why it might have
become collectible. The idea that this was the result of competing pricing
algorithms makes a great deal more sense to me.

Now, if you'll excuse me I'm off to weep over my broken dreams of belated
celebrity.

~~~
RK
My dad had a similar experience. His very obscure, self-published, out-of-
print book was showing up for something like $1000, while at the same time he
was mailing out free copies to people who emailed (plus shipping), just to
make more room in the garage.

------
benvanderbeek
I work at a mid sized Amazon 3rd party seller. We reprice automatically. With
thousands of SKU's there's no other way to be competitive. There are many
layers to consider though, you definitely can't let your whole catalog auto-
reprice. Usually sellers just focus on their top X% SKU's and let the rest
auto-calculate.

I wonder if we have a price ceiling setup...?

Edit: Yes we have a floor and ceiling. I have no idea what I was thinking.

~~~
blackRust
Any 3rd party tools available to 3rd party sellers? Offering something that
beats the current algorithms could be a good deal (if its not illegal).

~~~
bravura
I have code that does ecommerce price point optimization using machine
learning. In an ideal setting, it combines a variety of signals, including
prediction using previous sales data. It's also able to "smooth" over
different products, so that you can make good price point choices even for
products that have very little sales history.

~~~
ced
What's the algorithm?

Edit: I'm puzzled by the downvotes to my honest question. "machine learning"
is not an algorithm, it's a field!

~~~
yid
Probably some sort of regression for the prediction part, and perhaps linear
programming for the price optimization, since there are probably some
nontrivial (but possibly linear?) constraints on pricing.

------
Qz
A quick visit to amazon:

[http://www.amazon.com/gp/search/ref=sr_adv_b/?search-
alias=s...](http://www.amazon.com/gp/search/ref=sr_adv_b/?search-
alias=stripbooks&unfiltered=1&sort=-price)

Multiple books priced upwards of $600m. One has a Kindle edition for 9.99.

~~~
nightpool
A few of these only have one seller. Money laundering? A different
algorithmical problem? Something else?

~~~
smackfu
Could be this: If two sellers have the book, and are setting the prices
algorithmically, and then one of them sells it offline (like in a used
bookshop) and removes it from sale, how does the other seller change their
price to be more realistic?

------
lsc
oh man. reminds me of the days when I sold books on amazon and half.com. I
wrote a script that took the 'nickel less than the other guy' approach.

These things are /wonderful/ when it comes to making the market more
efficient. Really, though, the shipping costs eat up most of the efficiency.
Amazon needs an easy way to say "I want these 10 books, used. Find me the
lowest price (including shipping)" - the idea is that the more books you could
buy from one seller, the less shipping friction would be involved, but amazon
isn't really set up that way, which makes it much less efficient for the low
end used books.

~~~
baddox
Everyone always mentions that buying more items from a single Amazon store
would make shipping cheaper? Is that ever true? Of all the online stores I've
made purchases from, I believe monoprice is the only one that appears to base
shipping on tiers based on item size/mass. All the rest simply charge a set
rate for each item, and it doesn't matter how you divide your shipments up
into different orders.

~~~
lsc
well, the post office would take less of a cut. shipping one one-pound box is
usually a lot cheaper than shipping two half-pound boxes. In theory, amazon
could either give that surplus to the seller, to the buyer, or they could
split it between the two. (I guess they could also keep it for themselves, but
that might have negative PR consequences.)

~~~
meric
They'd also price it "above equilibrium" leading to a loss of potential
profits.

------
jonnathanson
Very funny and enlightening analysis. I've seen the fringes of algorithmic
pricing a few times in other categories -- especially out-of-print DVDs or VHS
tapes.

Example: don't ask me why I enjoy the movie My Dinner With Andre, but for
whatever reason, I do. A few years back, I wanted to buy a copy of the DVD and
checked Amazon. It turned out that the DVD was long out of print, and new
copies were going for $400 apiece. I figured this price was high, but
nevertheless, it was nothing that couldn't be explained by _actual_ rarity and
supply/demand metrics. Rare DVDs have been known to climb into the hundreds of
dollars, especially if new and unopened. But I came back a few days later, and
the price was $1932.78 (or something unusual to that effect). The next day,
$3500 and change. Which struck me as odd, to say the least. Was some nefarious
Goldman trader attempting to fix the market for Wallace Shawn's back catalog?

Needless to say, I didn't love the movie quite that much. So I passed. These
days, Criterion has released a new DVD version of the film, and accordingly,
everything's dropped back down to about $30 per copy -- including the price of
the original, OOP version. I feel sorry for anyone who actually might have
taken the plunge at $400, which is not out of the realm of possibility. That's
a lot of money for a film about two guys having dinner.

------
kbrower
I have a book with 1 sale and 6 sellers including amazon. They definitely do
not have the book.

~~~
limmeau
How do you know they do not have the book? Is it a Unique Item?

~~~
zandorg
Because if they all had a copy of the book, that would be 6 in circulation.
But only 1 is in circulation.

~~~
limmeau
What kind of unique book is that?

(The topmost book on the pile beside my bed being Vellum by Hal Duncan has
nothing at all to do with the question ;)

~~~
evidence
Bump your price way up and buy one of theirs, possibly many times before they
notice.

------
jaysonelliot
I can't begin to describe how much this pleases me. It's straight out of a
William Gibson novel, but happening _right now_.

God, I love living in The Future.

~~~
maayank
Indeed, I was also reminded of WG.

Alas, while it seems that information technology-wise we delve more and more
into a cyberpunk world, health-wise and body modification-wise we are still
not there. Where are my grafted muscles and commodity eye-balls?

------
cookingrobot
Automatic pricing is super common these days, even on more expensive things
than books. I'm actually working on a startup called shopobot.com that wants
to help people use the volatility to their advantage. We see rapid $50-100
swings on things like SLRs, so it's actually pretty significant.

Ironically our site is down right now because we're based on Amazon's web
services. Karma? :)

~~~
OkGoDoIt
That actually sounds pretty awesome. Didn't some of those CSE's like MySimon
used to have a graph of pricing over time as well? Any way I can get an invite
code for Shopobot?

~~~
cookingrobot
Sure! Just drop me an email (it's in my profile) and I'll hook you up with an
invite code.

------
hellasbook
I have been an on line book dealer for the past 10 years. Originally the rules
about having actual possession of the goods offered for sale were quite
strict.

Then came the megalisters - agencies with software that listed all books in
print and a contract with publisher's warehouses/library supply
services/factors to arrange delivery of in print books to customers.

Then came the "phantom listers" - agencies with software that spiders through
the listings of legitimate on line book dealers looking for titles with few
(or no) copies listed in Amazon. They then list them at inflated prices. Some
of these have more than one alias on Amazon. I think of them as the Piranhas
of the Amazon in the ay that they consume the smaller fish.

If and when they receive an order then then try to purchase a copy from one of
the "real" owners of the book.[Some are cheeky enough to request as well
a"trade discount" on the dealer's price] Small businesses listing on Amazon
and abebooks.com must keep their "fulfillment"rating high, so they can ill
afford to refuse to supply such parasites.In fact when I requested once that I
NOT be obliged to support what I think of as an unethical selling and pricing
model I was told

1] that the buyer was a valued long time customer and that 2] I could approach
the agency in question and - at THEIR discretion - request that they stop
ordering books from me.

Since AZ and ABE take out some % of the list price for the the books sold on
their site (as well as monthly listing fees, closing fees and sometimes a
portion of the shipping charge ) they can and do make a much greater profit
from the high priced phantom listers than from the legitimate reasonably
priced offerings of small book dealers, consequently they are not very
interested in aggressively policing the situation.

Now there is "Monsoon" and other software to automatically adjust prices on
line. In practice most often works to REDUCE the price below the lowest price
already listed - a rush to the bottom where books get listed for mere cents.

One tactic I recommend is to search for books and to see the widest range of
options is to use "addall.com" It comes in 2 flavours "New' and "Used"and
searches around 30 book listing services You can compare prices (ascending or
descending) and also see the kind of dealers who sell the books.

Many listings have boilerplate descriptions "we ship fast" "books may have..."
etc. which indicate that no human may have examined the object being
listed.Other listings have descriptions of content and condition that clearly
demonstrate that it is a"real"book from a "real"dealer. When in doubt look for
THAT dealers OWN website to ask questions and get personal service.

------
geekfactor
Hmmm. I wonder if this would work in reverse? Suppose I want to buy a book
that has several new copies for sale on the Amazon Marketplace for say $60. If
I post a new copy for sale for $10, perhaps one of these algorithms would kick
in to reduce the price?

~~~
scorpion032
In the meanwhile what would you do if you get placed an order for several of
those?

~~~
nightpool
Cancel the sale? As someone else said, that is always an option.

~~~
maxxxxx
Cancelling the sale if you don't like the price sounds a bit unethical :-)

------
derrida
Its all innocent when it is Amazon. But I am sure there must be similar
phenomena taking place in the financial markets, but the algorithms that
determine pricing there are more complicated than multiplying by a simple
factor.

------
Jach
I'm interested where the 1.270589 number comes from. sqrt(golden ratio) is
close: 1.27201965

~~~
extension
I would guess it's derived from other statistics using yet more automated
systems.

------
keeran
I'm surprised the author (and no-one here) hasn't worked out the starting date
of the automated price war based on the original RRP of the title :)

~~~
AretNCarlsen
bordeebook was effectively increasing their price by a factor of 1.2684/day,
and as of Apr 8 priced the new book at $2,198,177.95. I'll guess that the used
price ($35.54) implies that the initial pricing of the new book was about $50.

Log base 1.2684 of the ratio of the Apr 8 price to the estimated original
price = log($2198177.95/$50)/log(1.2684) = 45 [days]. Ergo looks like the two
algorithms started competing around Tuesday, Feb 22.

I'm sure my original price is off, but that actually won't make much
difference. If it was $40, then the initial date was Feb 21; if $60, then Feb
23.

[EDIT] By the way, if the price was originally 99c you would still see the
$2.2M price after just another two weeks (61 days total). Ah, exponents.

~~~
sesqu
The original price candidate, derived from the logarithm, that is second
closest to integer cents is 62.91998, with 162.85966 coming in 6th and the
other positions filled by implausibly large numbers.

Neither number has integer cents, since the actual series rounded or truncated
values between iterations. For that reason, a simple logarithm won't tell us
what the original price was - you'd need a simulation of the rounding.

~~~
AretNCarlsen
Good idea! Here it is in C: <http://pastie.org/1824968> (You have to manually
add the 'f' after the constants if you want to do the whole thing in floating-
point, as well as uncommenting the correct Dollars_t definition.)

For the range $20.00 to $200.00, no exact matches to an integer original price
(in cents) for the algorithms ceiling, floor, or round, in float or double.
This was on a 32-bit Xeon server (EC2).

------
originalgeek
> My preferred explanation for bordeebook’s pricing is that they do not
> actually possess the book.

There's only one problem with this theory. The Amazon TOS requires sellers to
have inventory before they can sell inventory. And they will ban you for life
for violating that.

~~~
FordMF
Yes and no. It's true this a policy violation, but I can tell you
unequivocally that a huge percentage of used sellers on Amazon are actually
arbitraging their competitors inventory. As a midlevel sized buyer and seller
on Amazon, I've always assumed that these sellers had some kind of secret
upper-tier arrangement with Amazon? Because as buyers, we see high volume
sellers do things on a daily basis that we would never do as sellers for
mortal fear of our account getting banned. Yet somehow these megasellers seem
able to muddle on year after year?

A lot of them are not necessarily even primarily e-commerce sellers, but are
semi-camouflaged divisions of larger traditional publishing entities - like
how the seller oneworldbooks is actually the textbook wholesaling giant MBS
Books. These sellers are companies so large they are akin to major new-book
publishers, so I assume their relationship with Amazon as a company is cozier
than ours is as "random small bookstore with Amazon account".

~~~
originalgeek
There is an upper-tier "club" on Amazon, you can see it alluded to indirectly
in various SC help files. Maybe these guys get away with more than we do.

------
atakan_gurkan
Pricing something high can actually increase sales. There is an example in
Cialdini's book "Influence", near the beginning of chapter 1. A jewelry store
owner was trying to get rid of some items, instead of marking the price down,
she marked them up (by a factor of 2), and they were rapidly gone.

It is a nice book to read, and will probably make you feel uneasy when you
realize the abundance of manipulation tactics around us.

------
russellallen
Sanity checks, people. Sanity checks.

~~~
benvanderbeek
Actually yeah, we set floors and ceilings. We sometimes use % up or down from
competitors but always w/in the floor/ceiling.

------
guynamedloren
[Discalimer: I've never looked into this before and I have absolutely no idea
how the Amazon reseller market works, so this might be impossible or
prohibited.]

What's stopping somebody from relisting every product that already exists in
the reseller market, but raising the price a few bucks? Even if people are
more likely to buy the lesser priced product, the seller has to lose since
they don't actually have any products on hand or skin in the game. Better yet,
they could relist the products for less than the competitors and jack up the
shipping prices to skim a few bucks profit off the top of each sale (this
would work if somebody sorted by item price only, instead of price +
shipping).

~~~
patrickyeon
My first question: what's the penalty for listing something that you can't
deliver? As in, if someone buys 'your' copy, adn someone else buys the only
other copy before you get it, what do you do and how does Amazon react when
you do that?

Furthermore, though, how much more do you have to charge to cover your own
time, shipping complexities, and just the general mess of dealing with two
other entities for every sale you make? All of that adds up to a pain in the
arse to make a couple bucks, in my estimation.

~~~
rick888
I've been a seller on amazon for the last 6 months. Your order to cancel ratio
needs to be below 7%. If it's above this, your account will be restricted (you
won't get paid during this time). It happened to me...but it was lifted after
about a month.

Depending on the category, many things on Amazon sell so fast, it would be
very difficult to do this.

------
jeffdavis
"they have a huge volume of positive feedback"

Is that a pun or something?

------
Figs
I've seen lots of books on Amazon priced at $0.01 or $0.02 before. Maybe a
result of similar processes? (I always assumed they were some kind of scam,
since why the hell would someone sell a book so cheap?)

~~~
5teev
Those sellers are counting on making money by shipping for less than the
amount by which Amazon reimburses them. ($3.99 for a recent purchase of mine,
while the postage was about $2.00.)

~~~
smackfu
Right. Practically speaking, these people aren't actually selling books, they
are just making money by doing the "handling" part of S&H.

------
maxxxxx
Sometimes you can use this for trade ins to Amazon directly. Last week I
traded in a book that had several prices for $100. Amazon took it for $27. On
other sites you can get it for $24.

------
JonnieCache
It's gonna be quite a giggle when this happens with the stock market.

~~~
joshu
You think it doesn't?

~~~
JonnieCache
Well there was the 'flash crash' but it wasn't that big a deal. This
financially uninformed hacker thinks it could get much worse some day soon.

<http://en.wikipedia.org/wiki/2010_Flash_Crash>

~~~
jrockway
It won't, because although computers have a lot of control over the market,
people also look at it pretty regularly. The reason why nobody noticed a
$23,000,000 book on Amazon is because out-of-print biology books are not very
liquid. If that were Microsoft stock, someone would have manually made a bet
on it, and then the price would have corrected after a while.

~~~
jonhendry
"It won't, because although computers have a lot of control over the market,
people also look at it pretty regularly"

The problem is a vast number of transactions, and huge price moves, can happen
in literally the blink of an eye.

~~~
bryanh
True, but at the same time, we're talking about billions of dollars of real
money. In clear self interest, all those institutions will have built obvious
checks in their system. Losing several billions of dollars in seconds is
something they want to avoid.

Indeed, the fact that the flash crash was the definition of something with a
vast number of transactions, huge price moves, and happened in the blink of an
eye but still was relatively minor and almost inconsequential shows the
reliance of the stock market.

~~~
jonhendry
It was inconsequential largely because most of the wonky trades were voided.

------
anactofgod
Heh.

I suspect that this is happening in a less transparent way with automated
commodities trading systems.

------
pitdesi
Someone should try selling a book that there are limited copies of (ie one
that can't be procured easily) to see what happens if someone buys from a
seller who doesn't have it.

~~~
gwern
The nice thing about selling books is that you aren't bound to deliver the
book - you can always just cancel the contract and refund the money. It's
unlike short selling stocks in that respect; you aren't vulnerable to a short
squeeze (<http://en.wikipedia.org/wiki/Short_selling#Risk>).

(For an example, read up on Porsche & Volkswagen: eg.
[http://www.nytimes.com/2008/10/30/business/worldbusiness/30i...](http://www.nytimes.com/2008/10/30/business/worldbusiness/30iht-
norris31.1.17372644.html) )

~~~
bryanh
The NYT piece on Porsche & Volkswagen (and many other market corners) is
actually a really useful piece of financial literature. It nicely outlines
some of the outlandish and clever ways that people can use common market
forces to create situations for profit.

I always try to think in a similar way when it comes to startups. Where can
you harness some market force to create a favorable position for yourself?

------
xudir
awww

------
njharman
I see this all the time. On Ebay too.

Hmmmmm, maybe I'm spending too much time trolling for things to buy?

