Tyler Cowen directs us to Michael Elsen:
Amazon’s $23,698,655.93 book about flies: A few weeks ago a postdoc in my lab logged on to Amazon to buy the lab an extra copy of Peter Lawrence’s The Making of a Fly – a classic work in developmental biology that we – and most other Drosophila developmental biologists – consult regularly. The book, published in 1992, is out of print. But Amazon listed 17 copies for sale: 15 used from $35.54, and 2 new from $1,730,045.91 (+$3.99 shipping). I sent a screen capture to the author - who was appropriate amused and intrigued.... At first I thought it was a joke.... But there were TWO new copies for sale, each be offered for well over a million dollars. And the two sellers seemed not only legit, but fairly big time (over 8,000 and 125,000 ratings in the last year respectively).... [W]hen I reloaded the page the next day, both priced had gone UP! Each was now nearly $2.8 million. And whereas previously the prices were $400,000 apart, they were now within $5,000 of each other.... By the end of the day the higher priced copy had gone up again. This time to $3,536,675.57. And now a pattern was emerging....
Once a day profnath set their price to be 0.9983 times bordeebook’s price. The prices would remain close for several hours, until bordeebook “noticed” profnath’s change and elevated their price to 1.270589 times profnath’s higher price. The pattern continued perfectly for the next week.... Why were they doing this, and how long would it go on before they noticed?... Both profnath and bordeebook were clearly using automatic pricing – employing algorithms that didn’t have a built-in sanity check on the prices they produced....
The behavior of profnath.... They presumably have a new copy of the book, and want to make sure theirs is the lowest priced – but only by a tiny bit ($9.98 compared to $10.00).... [But why] would bordeebook want to make sure theirs is always more expensive?... [Bordeebook] have a huge volume of positive feedback – far more than most others.... [S]ome buyers might choose to pay a few extra dollars for the level of confidence in the transaction this might impart. Nonetheless this seems like a fairly risky thing to rely on – most people probably don’t behave that way – and meanwhile you’ve got a book sitting on the shelf collecting dust. Unless, of course, you don’t actually have the book....
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....
[A]las, somebody ultimately noticed. The price peaked on April 18th... on April 19th profnath’s price dropped to $106.23, and bordeebook soon followed suit to the predictable $106.23 * 1.27059 = $134.97. But Peter Lawrence can now comfortably boast that one of the biggest and most respected companies on Earth valued his great book at $23,698,655.93 (plus $3.99 shipping).
