Algorithmic Collusion is Algorithm Orchestration

We propose a fresh meta-game' perspective on the problem of algorithmic collusion in pricing games a la Bertrand. Economists have interpreted the fact that algorithms can learn to price collusively as tacit collusion. We argue instead that the co-parametrization of algorithms, in ways as are necessary to obtain algorithmic collusion, typically requires algorithm designers to engage in some form of explicit collusion or algorithm orchestration.’ In our model, the algorithm designers play a meta-game of parametrizing their algorithms, which then play repeated Bertrand competition. The strategic analysis at the meta-level reveals new equilibrium and collusion phenomena. (JEL: C62, C63, D43, L13)