Amazon is a Monopoly

[illram]

"Monopoly" is not a great word anyway because it does not really capture what the law of almost every modern free market economy forbids. "Anti-competitive" is more accurate.

Using that definition it becomes easier to see how a company can have a large majority of the market share and not be a monopoly, because it is not engaging in anti-competitive behavior, and conversely, how a company can have a non-majority share of a market but still be considered anti-competitive (by for instance price fixing, or vertical market manipulation, or collusion with competitors, etc.).

 

[Zelig]

Paul Krugman on Amazon: Amazon’s Monopsony Is Not O.K.

So far Amazon has not tried to exploit consumers. In fact, it has systematically kept prices low, to reinforce its dominance. What it has done, instead, is use its market power to put a squeeze on publishers, in effect driving down the prices it pays for books — hence the fight with Hachette. In economics jargon, Amazon is not, at least so far, acting like a monopolist, a dominant seller with the power to raise prices. Instead, it is acting as a monopsonist, a dominant buyer with the power to push prices down.

And on that front its power is really immense — in fact, even greater than the market share numbers indicate. Book sales depend crucially on buzz and word of mouth (which is why authors are often sent on grueling book tours); you buy a book because you’ve heard about it, because other people are reading it, because it’s a topic of conversation, because it’s made the best-seller list. And what Amazon possesses is the power to kill the buzz. It’s definitely possible, with some extra effort, to buy a book you’ve heard about even if Amazon doesn’t carry it — but if Amazon doesn’t carry that book, you’re much less likely to hear about it in the first place.