Consumer Search Collusion And Artificial Intelligence

Download or read book Consumer Search, Collusion, and Artificial Intelligence written by Mike P. Vo and published by . This book was released on 2022 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: We use both economic theory and experiments with Artificial Intelligence (AI) pricing agents to study the roles of consumer search friction on collusion and implications on market prices and consumer welfare. By developing an oligopoly model in which consumers sequentially search for the best product with advertised prices, we find that collusion is easier to sustain with lower search costs. On the other hand, increasing search costs can reduce the collusive price. However, the price reduction is insufficient to increase the consumer surplus if the collusion sustains. Our experiments show that simple reinforcement learning algorithms (Q-learning) manage to adopt a trigger-price strategy to keep prices above the competitive level in a frictional market.