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https://doi.org/10.2139/ssrn.4...
Article . 2023 . Peer-reviewed
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Research . 2023
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Conference object . 2023
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Strategic Choice of Price-Setting Algorithms

Authors: Buchali, Katrin; Grüb, Jens; Muijs, Matthias; Schwalbe, Ulrich;

Strategic Choice of Price-Setting Algorithms

Abstract

Recent experimental simulations have shown that autonomous pricing algorithms are able to learn collusive behavior and thus charge supra-competitive prices without being explicitly programmed to do so. These simulations assume, however, that both firms employ the identical price-setting algorithm based on Q-learning. Thus, the question arises whether the underlying assumption that both firms employ a Q-learning algorithm can be supported as an equilibrium in a game where firms can chose between different pricing rules. Our simulations show that when both firms use a learning algorithm, the outcome is not an equilibrium when alternative price setting rules are available. In fact, simpler price setting rules as for example meeting competition clauses yield higher payoffs compared to Q-learning algorithms.

Country
Germany
Keywords

L13, reinforcement learning, 330, Economics, ddc:330, L49, Algorithmus, D83, Preisbildung, pricing algorithms, D43, algorithmic collusion, ddc: ddc:330

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selected citations
These citations are derived from selected sources.
This is an alternative to the "Influence" indicator, which also reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Citations provided by BIP!
popularity
This indicator reflects the "current" impact/attention (the "hype") of an article in the research community at large, based on the underlying citation network.
BIP!Popularity provided by BIP!
influence
This indicator reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Influence provided by BIP!
impulse
This indicator reflects the initial momentum of an article directly after its publication, based on the underlying citation network.
BIP!Impulse provided by BIP!
0
Average
Average
Average
Green