Artificial Intelligence (AI) plays a key role in some of the technological applications that have become indispensable to us. A growing number of firms are using computer algorithms to improve their pricing models, customise services and predict market trends. The combination of big data with technologically advanced tools such as pricing algorithms are posing challenges to competition policy and competition economics.
A widespread use of pricing algorithms raises concerns of possible anti-competitive behaviour. Algorithms may make firms’ actions interdependent without the need for explicit communication or interaction, increasing thereby the risk of tacit collusion and subsequently leading to higher price levels.
EE&MC is active in developing empirical tools that are able to measure the effects that algorithms have on the actual level of prices and on the degree of competition in real markets. The application of these tools is essential e.g. in investigating whether prices are at or above a competitive level.