Amazon’s $23M book about flies (2011) (opens in new tab)

I think I stumbled across similar behaviour, but for a used book. I was looking for a particular computer science book, couldn't find it new, and then decided to buy a used one from Amazon, ordering from the store with the best rating. It didn't arrive, and after a while (a few weeks) I received a notice that the delivery service had lost the book. I was refunded the money, though. The tracking number I got for the book from the store never worked though, I checked multiple times during those weeks. So I guess the same thing was at play here: I was sold the book although the store didn't have it. After failing to acquire the book, they just cancelled my order by pretending the delivery failed.

This boring story has a happy ending: I contacted the author (a retired MIT professor) if he could share a PDF with me, and he generated one from his old roff sources. He also sent me a signed copy from a stack he got from his publisher back then (80's), paying over $60 porto (US -> UK). I was blown away by his kindness and generosity.

Occam's razor. Automated pricing, not laundering, lol. Amazon provides an interface for it. Provide rules for automatically updating price. Very common in the online book market.

https://sellercentral.amazon.com/help/hub/reference/external...

> My preferred explanation for bordeebook’s pricing is that they do not actually possess the book. Rather, they noticed that someone else listed a copy for sale, and so they put it up as well – relying on their better feedback record to attract buyers. But, of course, if someone actually orders the book, they have to get it – so they have to set their price significantly higher – say 1.27059 times higher – than the price they’d have to pay to get the book elsewhere.

I've also seen arbitrage where the seller will buy the collectible on one platform, then drag their feet on paying, while listing it for sale on a different platform.

I suspect the strategy is similar to bracketing.

Bracketing isn't uncommon in small financial markets. You basically put a sell order in at a price a bit higher than the market and a buy order in a bit cheaper than the market. As the market moves, you also move your orders. The thing is you can't move them perfectly in sync with the market, and occasionally a large order comes in that blows through a few orders in the deck. So when someone comes along and buys a big chunk your sell order gets exercised. Someone else comes along and sells a big chunk and your buy order gets exercised. As soon as the orders are exercised you replace them.

The key is that you're always buying for a bit less than market, and always selling for a bit more than market. As the market moves you strongly tend to make money, regardless of which direction it goes. The more volatility, the more you are likely to make.

I think the strategy for being the higher priced book is similar. The seller knows it's a rare good, and they're counting on some class somewhere requiring the book. A bunch of students will need it all at once, and the cheaper copies will get snapped up, forcing some students to buy it at the higher price, and boom, your sell order at just above market got executed.

Maybe they should have limits, but it's just one book and it's unlikely to turn much of a profit, so it probably wasn't worth the effort.

If you want to watch basically the same information deducted in similar matter in video format, presented by a mathematician who makes hilarious youtube videos with very high production value, you’re in luck!

Matt parker made a video on this topic, and it’s great: https://youtu.be/sseSi0k3Ecg

It will not give you not a lot more information than you can find in this blog post (though it relates it to a stock market crash triggered by high frequency trading bots doing basically the same thing), but it’s highly entertaining.

——

edit: after re-checking the video, it states that is a video adaptation of the blog post, and the blog post is listed as primary source of the information :)

Related:

Amazon’s $23M book about flies (2011) - https://news.ycombinator.com/item?id=24809866 - Oct 2020 (81 comments)

Amazon’s $23M book about flies (2011) - https://news.ycombinator.com/item?id=16247254 - Jan 2018 (106 comments)

Amazon’s $23M book about flies (2011) - https://news.ycombinator.com/item?id=10289742 - Sept 2015 (94 comments)

Amazon’s $23,698,655.93 book about flies - https://news.ycombinator.com/item?id=2475854 - April 2011 (140 comments)

I recall other threads about similar cases but don't know how to find them. Anyone?

Or this classic

https://www.reddit.com/r/funny/comments/6ofdt6/how_i_made_29...

Stand UP Maths has a relatively recent video that explains what happened here: https://www.youtube.com/watch?v=sseSi0k3Ecg

The author's hypothesis sounds reasonable, but it is most likely not arbitrage as @neilv mentioned it. It is money laundering.[0]

[0] https://krebsonsecurity.com/2018/02/money-laundering-via-aut...

(edit: spelligating correctivization)

Might be a case of money laundry ? You would think it would be one-off then, but adding more units would make it more believable.

Example: it is very common to find people selling a pen for 50 Euro, by buying the pen you are gifted with concert tickets which are illegal to re-sell.

So think anything ilegal to sell or serve, that can be gifted if you buy that book.

edit: I agree with what user WaitWaitWha is saying.

It tickled me no end that although the book price was $23M, they still charged $3.99 in shipping. Gotta charge for shipping :)

Glad to see the prices are less chaotic today https://www.amazon.com/Making-Fly-Genetics-Animal-Design/dp/...

A runaway feedback loop like this between two powerful AI agents is one of the proposed ways that AI can destroy the world.

What if I say algo pricing is doing the same thing to stock markets? you'll roll your eyes and pass

I have a copy of the book… I would be happy to sell it for US$1 million. That's like 95% off!

Hmm. Is there a way to short-sell physical items like books?

This is interesting so I actually developed what should happen instead, mostly. Like where to price for differentiation, clearly undercutting sometimes with a lower price and at other times, when that doesn't make sense, instead raising the price by a bit to end up in an uncrowded price point. Ideally to over time make sense to buy at that price point, with merit, or just being a unique price.

Price is a strong indicator of quality, tells you a lot about clothes when there is no outside reference. Price means that is what the seller will take for the good, a webpage they serve is effectively a call option contract on the webpage when you load it. That's what we determined as a group, the minute bhphotovideo.com loads up a page with a number on it that's a contract to buy at that price--like until there's no stock or until there's a timeout of some kind, the two conditions that got them out of the terms back when the terms were ads on radio. bhphotovideo.com includes terms refusing business on Shabbat, Saturdays, which is uncommon, that also applies and affects things. I think shopping carts work but purchasing doesn't. Webpages about products with prices are call options. Right but not the obligation to buy that good at that price. The seller must honor that price if the right is exercised.

That right lasts perhaps a day, some amount of time to decide without the price going up or down as one thinks about it. On the phone with airlines, you can get a price for a ticket this way, and it's valid until you end the call. Get ahold of the money during the call, and pay it, and it's yours. It can be an hour, it gets stretched out, it is reserved while the flyer is on the phone. The call option has a fixed price, despite the good perhaps fluctuating minute to minute, Amazon prices very keenly. In practice by authorizing the transaction all the pages involved with all the advertising and all the legal language and the pictures, the specs, they all become the terms of the transaction. It seems like there is a lot of liability on the seller's part, and it truly is, it is very competitive, but the number that carries most weight is the price. In the end that price can determine a good deal or a bad deal, or a purchase or losing the purchase to a competitor with lower prices. So in a very crowded market, with say five widgets at $10, and three at 11$, a good currently at $12 must decide carefully--what is the cost of goods sold? If it's low by all means undercut and price at $9, or perhaps $8. Whereas if it costs $10 already, the best is to sell for $13 or so, in a category of its own. And eventually identify that price point's needs and values, what they expect and what better work to justify charging that. But there will be more profits at the higher price point for the latter, the marking up on the one hand and on the other some number of customers will trust it to deserve that price point, whereas charging the same price as 5 other widgets would not work. Critical that the good isn't strictly inferior to the competition, like has or licensed an innovation that gives it at very least a story which cheaper widgets aren't always better, or that it defies the limits of the product category.

So that was going to be a piece of mathematical theory, like give robust and consistent advice on when to undercut and when to instead elevate the product with a unique price. Hey, some people want whatever they can buy with some amount of money they have, others think the game is about buying the middle-of-the-road good, that that is most reasonable. Others will say what matters is the brand or how hot the tech is, if protected that provides a huge margin always, no need to undercut. Instead when they are recognized they can raise the price to be distinguished.

I had it working mostly. Gave consistent answers never got to $23 million books. Kept the prices stable.

To anyone considering reading the article, there isn't much more substance than a guy stumbling upon a book that is listed on Amazon for an absurd price.