We’re Entering an AI Price-Fixing Dystopia
We’re Entering an AI Price-Fixing Dystopia
Algorithmic collusion appears to be spreading to more and more industries. And existing laws may not be equipped to stop it.
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Competition is supposed to help lower prices. If one tennis racket manufacturer overcharges, then another can charge less and steal all their sales.
But if landlord #1 owns an house and overcharges while landlord #2 owns a house and does not, it’s not like landlord #2 gets all the tenants. They still just have one house. There is no way for one of them to win by benefitting tenants. They can however both win by both hurting tenants.
I guess where there is too much housing, one apartment building can keep full occupancy by charging less, while another building across the street might have 60% occupancy because they overcharge. But rarely is there too much supply anymore. And rarely are there such head-to-head commoditized situations.
There's a lot one side of the market can do with collusion to drive up prices.
For example, the housing supply available on the market right now often fluctuates over time - once someone has a long term tenancy, their price is locked in until the next legal opportunity to change the price. If there is a low season - fewer people living in an area, higher vacancy rate - in a competitive market, tenants often want a long term contract (if they are planning on staying), and the landlord who can offer that will win the contract. The landlord gets income during the low period, but forgo a higher rent they might get during a high period. Another landlord who tries to take a hardline policy of insisting tenants renew their contract during the high period would lose out - they would just miss out on rent entirely during the low period, likely making less than the other landlord.
Now if the landlords form a cartel during the low period, and it is not possible to lease a rental property long term, then the tenants have no choice but to be in a position to re-negotiate price during the high period. Landlords avoid having to choose between no revenue during the low period and higher during the high period, or a consistent lower rent - instead they get the lower rent during the low period (at a slightly lower occupancy rate, but shared across all the landlords) AND the higher rent during the high period.
The insanely unjust asymmetry of the "housing market" is why landlords exist in the first place.
It's very easy to gouge people if you violently control their basic needs for survival.
Housing is often a market failure, because construction does not respond dynamically to house prices due to some regulations and nimbys.
It is, though there are more forces than that at play.