Chapter 9 TACIT COLLUSION: COOPERATION TO REDUCE COMPETITION
Amazon is dealing with the tactics of collusion and cooperation to reduce competition.
When Amazon entered the e-book market in the late 21st century,
Bezos priced the best seller for $ 9.99. This was a significant discount
on new hardcover books that are usually sold. This strategy drives
customers from traditional publishers and helps Amazon gain a
share of online book sales. After fighting the plan, Amazon caved.
But the Department of Justice sued five publishers and Apple for collusion,
and Amazon described one of the resulting settlements as
"a big win for Kindle owners." The two largest traditional publishers have since merged.
Random House and Penguin, which are seen as a chance to
build an entity that can stand up to Amazon's market power.”
In the long run, what publishers have to fear the most is not Amazon, but an idea it has helped engender the only players in the game which are the authors and the readers.
Amazon has had to deal with collusion which exists when firms
in an industry agree to coordinate their strategic choices to reduce
competition in an industry. In the extreme, collusion occurs when
firms coordinate their output and pricing decisions. In some circumstances,
such collusion can lead to economic profits.
On the other hand, Amazon is currently involved in
cooperative strategies that exist when firms work together to reach a
common goal of obtaining superior economic performance.
Through this partnership with other major brands and suppliers
Amazon has allows companies to use their e-commerce platform
to sell its products; which in return, Amazon receives a portion of the profits.
At this point, we don’t know what the future will hold
for the e-commerce giant. In recent years President Trump
has been an immense critic of Amazon, and Jeff Bezos, which lead to
Trump saying Amazon had a "huge antitrust problem."
By the United States Department of Justice, standards a company with
a market share of greater than 50% has been necessary for courts to
find the existence of monopoly power." Amazon is not a monopoly
because it is only controlling 10% of retail sales in the U.S.
Amazon has been expanding and business such as
AWS Amazon’s cloud base services and transportation with
Prime air and home delivery services. The best is yet to come for Amazon.
References
Barney, J (2011). Gaining and Sustaining Competitive Advantage (4th ed). Upper Saddle River, NJ: Pearson.
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