Big Data and Machine Learning Algorithms Could Increase Risk of Collusion

Today, big data is a not a novel word anymore and neither is machine learning algorithms, it is increasingly getting diffused in everyone’s life. A combination of big data together with tools like pricing algorithms is changing the scenario of the competitive commercial market. In an oligopolistic market in which a number of companies operate, big data combined with machine-learned algorithms are helping them to make important strategic decisions. It is still quite difficult to judge the magnitude of this phenomena but more and more companies are making use of this algorithms to develop their strategy on pricing, customisable services and analyzing market trend.  This phenomenon is definitely connected to the increased level of efficiencies and benefitting the firms as well as the consumers in choosing new, better and tailor-made products and services.

What is machine learning algorithms –

An algorithm could be termed very simply as a set of operations applied mechanically or systematically to a definite set of data, which bring out a finite output. With the advancement of computer science algorithms have developed to perform a set of repetitive tasks which involves complex calculations and processing of a large number of data (big data). Recent unbelievable advance in artificial intelligence and machine learning have brought it to a new height, which allows computers to solve immensely complex problems, make predictions and take decisions efficiently and quickly than human society could imagine. Apart from analyzing and producing output efficiently from a big data set machine learning could also be used for Data security.

Applications of algorithms in business –

In a data-driven society of today, the importance of big data combined with machine learning algorithms is growing by every second. Although, some businesses are still slow on adopting machine learning algorithmic system more and more businesses are relying on them to analyze and predict which in turn help in optimizing their businesses.

Concern regarding the negative effect of big data and machine learning algorithms on competitive market –

While the power of big data unleashed through these machine learning algorithms is changing the face of both business and consumer behaviour alike, the threat of large-scale underlying collusion is looming large. It is feared that widespread use of machine-learned algorithms could change the competitive behavior. It could actually enable firms to replace explicit collusion practice with tacit co-ordination without the need for making an agreement. Normally, to find an illegal agreement one would require some proof of direct or indirect contact between two or more firms, tacit collusion falls outside of the periphery of antitrust or competition laws. In an ideal market condition this may enable firms to involve in supra-competitive pricing without making unlawful contacts among themselves but undoubtedly, machine learning algorithms have increased the grey area between obvious collusion and lawful unspoken collusion, which finally allowing firms to maintain the profit level without having to engage into an agreement.

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BI Consultant

DataFactZ is a professional services company that provides consulting and implementation expertise to solve the complex data issues facing many organizations in the modern business environment. As a highly specialized system and data integration company, we are uniquely focused on solving complex data issues in the data warehousing and business intelligence markets.

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