Procompetitive and Anticompetitive Effects of Algorithmic Pricing Compared in Article by Analysis Group’s David Smith and Professor Steven Tadelis
November 23, 2021
Advances in technology have made it possible for businesses to use algorithms to monitor their rivals’ prices and adjust their own automatically, raising questions over whether pricing algorithms might facilitate or exacerbate anticompetitive or collusive conduct without human intervention. Analysis Group academic affiliate Steven Tadelis and Vice President David Smith explore these questions in their article “Algorithmic Pricing: What Every Antitrust Lawyer Needs to Know.” The article was published in The Price Point, the newsletter of the American Bar Association Section of Antitrust Law’s Pricing Conduct Committee.
Professor Tadelis and Dr. Smith explain how pricing algorithms work from an economic perspective and distinguish procompetitive uses from the various forms of potential anticompetitive conduct, including horizontal price-fixing, vertical price-fixing, and price discrimination. They note that, although the use of algorithms to monitor and set prices has increased considerably over time, it remains empirically unclear whether algorithmic pricing is more likely to threaten or to benefit market competition.
The authors would like to thank Senior Analyst Emma Solomon and Analyst Patrick Zimmer for their assistance with this article.