In April 2011, a biologist at UC Berkeley noticed that a classic book listed on Amazon.com, The Making on the Fly by Peter A. Lawrence, was priced at $23,698,655.93, plus $3.99 shipping and handling.1
Usually, this book sells for around $100. To be totally clear here, it’s odd for a book to retail for $24 million dollars.
An alternative use of $24 million would be buying your own mansion and getting your very own zip code.2
It turns out, the book was being sold by two Amazon.com marketplace sellers, each of which was basing its price off the other. When one would raise the price, the other would respond automatically to adjust their price accordingly. These weren’t exactly the most sophisticated algorithms. But they were consistent.
Of course, after the sellers set up their pricing algorithms, they promptly forgot about them. Things got interesting.
Somewhere around February 2011, the price of the book started to increase by around 30% every day. If the textbook continued to increase in price at the same rate, uninterrupted (as it had been for 2 months), it would have been more valuable than all of the other assets in the world combined (roughly $600 trillion in 2011) by June 2011.
But eventually, someone caught wind of the auto-pricing fiasco. Overnight, the price tanked by over $23 million. It was reset to $100.
Until a few weeks later when the algorithms got back to it and prices climbed back up to over $1,000 again!
Now what can you do about it?
Pay attention to prices of what you buy. Most change, and you can get money back if a store drops their price after you buy it. Prices for almost all items are dynamic in some way or another. Even toilet paper prices.3 Amazon alone reportedly changes almost 80 million prices per day 4 — up from ~250,000 price changes per day two years ago. 5
You just don’t always see this price changes because they do not stick out as wildly as this example does. But prices are changing, and the rate only seems to be picking up.
In the meantime, we’re building Paribus to fight back for consumers. The world’s most powerful companies have incredibly sophisticated algorithms that control what pay online. We think it’s only fair that consumers get to have great technology to fight back too.
If you’d like access, you can sign up for our beta here.
Sources and additional resources:
1 “Amazon’s $23,698,655.93 book about flies” – Michael Eisen, Apr. 22, 2011
2 “Top 10 Most Expensive Celebrity Homes” – The Richest, Jul. 26, 2013
3 “Coming Soon: Toilet Paper Priced like Airline Tickets” – WSJ, Sept 5, 2012
4 “Amazon’s Pricing Strategy Makes Life Miserable For The Competition” – Forbes, Nov. 20, 2014
5 “Amazon makes more than 2.5 million daily price changes” – Profitero, Dec., 2013