Speaker: Emilio Calvano (University of Bologna & Toulouse School of Economics)
Title: Artificial Intelligence, Algorithmic Pricing, and Collusion
Abstract: Increasingly, algorithms are supplanting human decision-makers in pricing goods and services. To analyze the possible consequences, we study experimentally the behavior of algorithms powered by Artificial Intelligence (Q-learning) in a workhorse oligopoly model of repeated price competition. We find that the algorithms consistently learn to charge supracompetitive prices, without communicating with one another. The high prices are sustained by collusive strategies with a finite phase of punishment followed by a gradual return to cooperation. This finding is robust to asymmetries in cost or demand, changes in the number of players, and various forms of uncertainty.
Bio: Emilio Calvano (PhD, Toulouse School of Economics, 2008) is Associate Professor of Economics at the University of Bologna, associate faculty at the Toulouse School of Economics and research fellow of the Centre for Economic Policy Research in London (CEPR). He is an applied theoretical economist whose research mainly focuses on the theory of Industrial Organization. He has published in top international peer-reviewed outlets such as Science Magazine, American Economic Review, Management Science, American Economic Journal: Microeconomics, Economic Journal and International Journal of Industrial Organization and is associate editor at the Journal of Industrial Economics. His research interests include the economics of artificial intelligence, the economics of platforms, information economics and competition policy. His recent work studies the impact of AI powered algorithms (such as pricing software and recommender systems) on digital markets.
