One day earlier in his career Dall was in the market to buy (borrow) 50 million dollars. He checked around and found the money market was 4 per cent-4.25 per cent, which meant he could buy (borrow) at 4.25 per cent or sell (lend) at 4 per cent. When he actually tried to buy 50 million dollars at 4.25 per cent, however, the market moved to 4.25 per cent-4.5 per cent. The sellers were scared off by a large buyer. Dall bid 4.5. The market moved again, to 4.5p per cent-4.75 per cent. He raised his bid several more times with the same result, then went to Bill Simon’s ofﬁce to tell him he couldn’t buy money. All the sellers were running like chickens.
“Then you be the seller,” said Simon.
So Dall became the seller, although he actually needed to buy. He sold 50 million dollars at 5.5 per cent. He sold another 50 million dollars at 5.5 per cent. Then, as Simon had guessed, the market collapsed. Everyone wanted to sell. There were no buyers. “Buy them back now,” said Simon when the market reached 4 per cent. So Dall not only got his 50 million dollars at 4 per cent but took a proﬁt on the money he had sold at higher rates. That was how a Salomon bond trader thought: He forgot whatever it was that he wanted to do for a minute and put his ﬁnger on the pulse of the market. If the market felt ﬁdgety, if people were scared or desperate, he herded them like sheep into a corner, then made them pay for their uncertainty. He sat on the market until it puked gold coins. Then he worried about what he wanted to do.
In calculus terms, it would be like taking a derivative of the Amazon marketplace and operating on different rules than most or all buyers and sellers on the marketplace.
The trick is minimizing your risk and making sure to adhere to Amazon's terms. [Does the scenario in the grandparent comment go against Amazon's terms I wonder?]
The ability to push the price down gives informed actors some pricing control on the market, and the subtext is that it allows for folks to push around pricing to understand the elasticity for any product. Now if you can get them to buy a 'put' of your product :-)
I'm not a lawyer, but I've worked in the financial sector and undergone FSA mandated training courses on what you can and can't legally do with equity pricing. What the OP was suggesting is an illegal practice in most equity markets.
In stocks, there's almost always someone willing to buy and someone else willing to sell at any given price, so how are you going to drive the price down without selling stock?
...always like there's always people willing to buy books at amazon?
However, I'd imagine that in just as many cases, if not more, there is no real "actual value" -- only computers playing with each other.
I wouldn't expect this to last very long, but you could potentially take advantage of it while it does by simply identifying seller's who lack limits and posting products within their categories at super low prices then buying them out and re-listing.
Eventually all of these scripts will have guards in them for upper and lower and probably limits on the percentage change over time.
It gets worse: When I finally did find a seller who allowed me to order the part, they accepted my order -- and then came back later saying that, oh no, actually they didn't have it either, but would I like to convert my order into an order for something else? (Fuck off.)
I still don't have the part.
The thing is that while these automatic pricing scripts exist, they aren't in enough widespread use to do what you're suggesting.
So no unlimited risks there.
Not to mention that in order to make money over normal practices, you have to a) find books that are being sold at less than wholesale price (~60%ish RRP), and b) find a book that no-one wants to buy at your competitor's super-cheap rate that they will buy at your more expensive one - you're going to have to be in for the long haul to do this.
It's not unethical because the buyer in this case can't really buy up all of the supply and therefore is just looking for arbitrage opportunities or opportunities to exploit weaknesses in a competitors business model.
The opportunities, over time, are very limited though:
1) You can't actually buy up all of the supply. If you were able to buy all of the listed supply and then reset the price you'd soon attract other sellers who had previously unlisted supply.
2) If there was real demand for an extremely high priced book I'd guess the author or publisher would be releasing a new version to meet the demand.
3) Although some printing of books are considered to be collectible, that market is limited. Generally the value of the book is the information it provides, which means that as the price rises the (perhaps less informative) substitutes become more appealing to buyers.
4) If you exploit a competitor's pricing algorithm enough to make them notice, they'll just change their algorithm. In this case, perhaps they don't sell you the books or they don't respond to your prices.
You might be able to make a few bucks on this strategy, maybe a few people could even eke out a living, but it would be risky... they'd earn it.
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.
Maybe if you have a slightly bad reputation on Amazon that will keep people from buying your book. Maybe you can purchase the book locally and send it to the buyer in a pinch. Maybe you can purchase the book from the actual seller and just use the buyer's shipping address. Etc.
Now, if you'll excuse me I'm off to weep over my broken dreams of belated celebrity.
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.
Edit: I'm puzzled by the downvotes to my honest question. "machine learning" is not an algorithm, it's a field!
Multiple books priced upwards of $600m. One has a Kindle edition for 9.99.
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.
It uses textbooks as its example too :)
There seems to be a reasonable amount of literature on algorithms for this kind of combinatorial optimisation, including reasonably fast but well-performing heuristics like the above. Maybe amazon should pull their finger out.
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.
(The topmost book on the pile beside my bed being Vellum by Hal Duncan has nothing at all to do with the question ;)
God, I love living in The Future.
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?
Ironically our site is down right now because we're based on Amazon's web services. Karma? :)
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
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.
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.
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.
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).
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.
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".
It is a nice book to read, and will probably make you feel uneasy when you realize the abundance of manipulation tactics around us.
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).
From experience, overpricing works when you have better feedback than your competitors.
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.
Depending on the category, many things on Amazon sell so fast, it would be very difficult to do this.
If you can operate at large enough scale, thousands or tens of thousands of books a month, then I think there's an opportunity to be had, even if you're pocketing a dollar or two from each sale.
Is that a pun or something?
The problem is a vast number of transactions, and huge price moves, can happen in literally the blink of an eye.
The only people that will have problems are people who are heavily-leveraged and have no hedge.
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.
For the record, I personally think it could, but not due to bugs in pricing obscure stocks.
I suspect that this is happening in a less transparent way with automated commodities trading systems.
Often, she'd go to library or estate sales and just scan hundreds of books. If they met her pricing targets, she'd buy them. But one time a book she scanned had an incorrect barcode number (it wasn't clear if Amazon had the incorrect barcode or what), but so did several other sellers of the same book.
When she posted the book for sale, it came up with a different title, but she hadn't noticed while she was posting inventory. Initially my wife assumed she'd lost the inventory when someone tried to buy from her, but it wasn't until she tried to drop ship from another seller that they realized what was going on.
The sellers all had to cancel their orders with each other on down to the buyer, who took it in stride.
But, with Amazon, you can still rate sellers who cancel your order, so there's at least that risk...
(For an example, read up on Porsche & Volkswagen: eg. http://www.nytimes.com/2008/10/30/business/worldbusiness/30i... )
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?
Hmmmmm, maybe I'm spending too much time trolling for things to buy?