When I'm selling something used, and I look at prices for other listings, I'm competing with them. I want to have a price that is attractive, given the landscape. I'm not messaging all the other sellers and suggesting we all raise prices by 10%, or having an algorithm run by a third party service do that indirectly.
RealPage made it so that landlords were less competitive and more cooperative. Landlords would share proprietary information and then RealPage would help them all set prices collectively. It's just old fashioned price fixing with a SaaS and an algorithm.
So the difference is using pricing info to beat your competitors vs using pricing info to collude with your competitors.
>I'm not messaging all the other sellers and suggesting we all raise prices by 10%,
The way competitors legally message each other to suggest a price increase is via the prices themselves.
E.g. an airline wants to raise the price of a ticket from New York to Los Angeles from $500 to $530 -- and they secretly want the other airlines to follow them and raise their prices too.
1) The airline submits the price increase to the global travel reservation system that all airlines can see. All the other airlines have computers constantly monitoring all the other airlines' ticket prices and can instantly adjust prices in response.
2) The airline that wants the price increase waits to see how the other airlines respond. Either (1) the competitor airlines keeps their lower prices to "take market share" -- or -- (2) they also raise their prices to match which "maintains status quo of market share" but all competitors get to take advantage of charging the higher price
3) If the other airlines don't match the higher price, the airline that "proposed" the higher price then rolls it back to $500. All this can happen within a few hours.
That's the way competitors "collude" to raise prices out in the open. The publicly visible prices are the messaging system. The loophole here is that the changing prices must be visible because the potential passengers buying the tickets need to see them too.
The above scenario has been studied by various papers and the government. The prices simultaneously act as both a "cost to buy" and as a "message to cooperate".
Legal "collusion" via price signals is easier in concentrated industries with few competitors (e.g. airlines). It's harder for fragmented markets or markets with hundreds-to-thousands of competitors. E.g. a barbershop wanting to raise the price of haircuts by $5 isn't going to get the hundred other barbershops to also raise their prices by $5.
>The above scenario has been studied by various papers and the government. The prices simultaneously act as both a "cost to buy" and as a "message to cooperate".
Yea I mean. A simple watch of movie film "A bueaitful Mind" starring John Nash as math genius russel crowe. Crowe equilibrium or whatever it's called. That scene where the nerds were in the bar trying to get the girl. his friends said let the best man win and crowe said - no - only way to win is we collude. and then they won. Now imagine that -- but it's not russel crowe, it's united airlines.
I mean if you look at companies from that crowe equilibruim perspective and treat them as sophisticated and rational.. one would expect most everything to be rigged!
RealPage made it so that landlords were less competitive and more cooperative. Landlords would share proprietary information and then RealPage would help them all set prices collectively. It's just old fashioned price fixing with a SaaS and an algorithm.
So the difference is using pricing info to beat your competitors vs using pricing info to collude with your competitors.