I’ve mentioned a $6,200 Kindle e-book before (discounted from a $7,800 print book), but here’s some Amazon pricing that has that beat by a long shot.
A few weeks ago, Michael Eisen noticed a very odd pricing pattern in a couple of Amazon resellers of the biology textbook The Making of a Fly. Whereas used copies of the book started around $35, a couple of resellers offering new copies were asking millions of dollars for it. The price eventually peaked at $23,698,655.93 before someone noticed and reset the price back down.
The reason for this had to do with the algorithms the two sellers used to set their prices—based on each other’s prices. One reseller, profnath, was setting its price to about 99% of the highest—while the other, bordeebook, was setting its price to 127% of the next-highest. Every day, each algorithm would kick in off the other’s newly-adjusted price, moving the prices inexorably higher.
At the moment, profnath is the only listed reseller of the book in new condition, with a list price of $976.98—a wee bit high still for a textbook selling used in the $45-$250 range. Bordeebooks has moved over into used, where it holds the high price—though I don’t know whether that’s because it sold its new copy and had a used one in reserve, or because it figured that was the best way to break the algorithmic feedback loop. Still, where one such loop happened, there could be others.
What’s fascinating about all this is both the seemingly endless possibilities for both chaos and mischief. It seems impossible that we stumbled onto the only example of this kind of upward pricing spiral – all it took were two sellers adjusting their prices in response to each other by factors whose products were greater than 1. And while it might have been more difficult to deconstruct, one can easily see how even more bizarre things could happen when more than two sellers are in the game. And as soon as it was clear what was going on here, I and the people I talked to about this couldn’t help but start thinking about ways to exploit our ability to predict how others would price their books down to the 5th significant digit – especially when they were clearly not paying careful attention to what their algorithms were doing.
Of course, you won’t see this kind of weird price war with e-books as long as agency pricing remains in effect (and e-books can’t be sold second-hand anyway), but it’s an interesting illustration of how the law of unintended consequences can apply to digital doings.