GULYÁS, Gábor György, Ph.D.

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Amazon is an unfair market – unless you are a disguised robot

2017-06-30 | Gabor

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When we visit webshops, we tend to have the perception that what we see is the ground truth that everyone else also sees, including products, services and prices. However, this is an illusion, as website functionality and pricing are highly customizable for personal preferences.

There are proven examples when companies tried to benefit from this illusion of their visitors – and below you can see two examples illustrating this. On the left, you can see online stores who used differentiated pricing, like for example, Amazon offered different prices based on the regions of their potential customers (source). On the right, a real example is provided by using a price-discrimination busting service, the Sheriff tool.

x Examples where personalized prices were found. [source]
x An exact example of personalized pricing: not all users get the same prices. [data collected via the Sheriff tool in 2016]

While there are still shops pursuing this practice,

Amazon stopped with it. But did you know that it still offers a tool for manipulating prices?

Amazon allows algorithmic pricing for vendors who use their platform. This means, that these sellers can use programs to automatically adjust their prices, even many times per day (at least not personalized prices!). Price changes can be triggered by many things, such as when their competitors change their prices, or according to a specific time of the day. Just like when gas stations raise prices when closing time approaches. Furthermore, this is not a lonely feature on Amazon, companies like RepriceIt or RepricerExpress are offering algorithmic price management services.

In a recent study (data from 2014 and 2015) researchers collected data on 1641 famous products, and they identified 543 sellers who seemed to be using algorithmic pricing. During the data collection period those sellers changed their prices many times of a given product (some even 100 or 1000 times!), usually adjusting to the price set by competitors or Amazon (who appears as a seller in this case).

This leads to a pretty unfair business practice by Amazon. Why? Well, let’s see:

  1. Most people are not aware that dynamic pricing exists. Even more people do not know Amazon uses algorithmic pricing. The thing is that this system could be pretty easily be used against you, but you have a little chance to learn about it (so at the end you’ll leave more money on the table).

  2. But even if you are aware, you could not do much. You can’t outcompete robots and it is not possible to track all prices all the time to know when it is a good deal.

  3. But even if you were up to be using robots to see when prices drop, Amazon forbids you using robots to learn competitor prices. While in theory you could use scripts to crawl product profiles (like this), it is disallowed to learn competitor prices that way (checking pages like this). The robots.txt says Disallow: /gp/offer-listing and they also technically enforce this policy.

But do not be surprised. In the same spirit, Amazon recently patented a technology that disabled price comparison when you visit their physical stores.

Tags: amazon, fairness, crawling, transparency

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