Lots of normal people would pay $23 for a book. But $23.7 million (plus $3.99 shipping) for a scientific book about flies!?
This unthinkable sticker price for “The Making of a Fly” on Amazon.com was spotted on April 18 by Michael Eisen, an evolutionary biologist and blogger.
The market-blind book listing was not the result of uncontrollable demand for Peter Lawrence’s “classic work in developmental biology,” Eisen writes. Instead, it appears it was sparked by a robot price war…
Eisen watched the robot price war from April 8 to 18 and calculated that two booksellers were automatically adjusting their prices against each other.
One equation kept setting the price of the first book at 1.27059 times the price of the second book, according to Eisen’s analysis, which is posted in detail on his blog.
The other equation automatically set its price at 0.9983 times the price of the other book. So the prices of the two books escalated in tandem into the millions, with the second book always selling for slightly less than the first.
The incident highlights a little-known fact about e-commerce sites such as Amazon: Often, people don’t create and update prices; computer algorithms do.
Individual booksellers on Amazon and other sites pay third-party companies for algorithm services that automatically update prices. Some of these computer programs purportedly work very well, getting sellers up to 60% more sales because they underbid the competition automatically and repeatedly…
“It’s pretty much like the stock exchange. What you see there is the prices changing all the time — but they never change drastically. Sometimes it’s a dollar here a dollar there — maybe $10. For a book, it probably would be pennies.”
Often producing as much useless “value” as many of the computer trades made for hedge funds and mutual funds. All you can hope for as a retail investor is to focus on what you calculate is the real value of equity over time – and let the rest of the market spin wheels in artificial endless loops.
Our stock markets will not do anything about it. I doubt Amazon will do anything about the same absurdity in their own mosh pit.