A post on Michael Eisen's blog about genomes on 22 April 2011.
An unusual but great example of the potential pitfalls of automation.
Michael wanted to buy a book by Peter Lawrence called The Making of a Fly. He went onto Amazon. Although it was out of print 17 copies were listed for sale: 15 used from $35.54, and 2 new from $1,730,045.91 (+$3.99 shipping).
Michael knew the price of over a million dollars had to be wrong, but he was quite sure it was from legitimate sellers. However, he was even more surprised when the next time he looked the price was nearly $2.8 million. The price peaked on 18 April 2011 at $23,698,655.93 (plus $3.99 shipping).
The explanation is as follows (taken from The Risks Digest)
* Seller A didn't really have the book, but planned to buy it from
Seller B if someone placed an order. They had a better feedback
record than B, so someone might buy it from A even at a higher
price, and had programmed their price to be 27.0589% higher than A's,
so they'd make a profit.
* Seller B, meanwhile, was trying to ensure they just barely had the
lowest price, and had programmed their price to be 0.17% lower than
their competition.
* Both prices were updated automatically once a day—thus rising
exponentially until somebody noticed.
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