Discussion:
This article discusses the market power Amazon has. Paul Krugman is under the opinion that, as a monopsonist, “Amazon [has the ability to]… systematically [disadvantage] books with a particular political bent.” Mr. Krugman gives the book “Sons of Wichita” as an example of a book that is being disadvantaged in that particular way. In retaliation, the author argues that Amazon is not a monopoly in the U.S., citing Barns & Noble as a potential competitor. However, Krugman argues that it is not on the bookselling front that all Amazon’s power is concentrated: it is on the ‘buzz creating’ front, i.e. the ability to create buzz about a book. Once again, the author dismisses this point, saying that nobody hears about books through Amazon; it can neither create nor kill buzz on a large-scale. For these reasons, the author argues that Amazon is not as dangerous as others claim it is; its market power itself is not as abundant as it is portrayed to be.
Key words:
1. Monopsony: One big buyer for many sellers
2. Anti-trust action: Anti-monopoly law
Context:
1. R.A. (Ryan Arvent), the author, mentions Jean Tirole’s work on regulating monopolies. More about this can be read here.
2. A point of my own that I want to add that supports Krugman (although I agree with Arvent) is that Amazon might get some of its power from brand loyalty, as well as the fact that customers are accustomed to Amazon. Just like many people are hesitant to switch from Apple to Microsoft (or vice versa) because they may know one better, people may be hesitant to switch from Amazon to Barnes & Noble. In other words, although Arvent points out that there are many other online bookstores, just because consumers can switch, it does not mean that they will.
3. There is a similar famous antitrust law case in 2001 where the Department of Justice in the United States of America accused Microsoft Corporation of abusing its monopoly power. It claimed that Microsoft used its power to bundle Internet Explorer to the Microsoft Windows operating system, which may have been what caused Internet Explorer to be so successful. In the end, the Department of Justice required Microsoft to share its programme with other search engines. Wikipedia has a good synopsis of this case.
This article discusses the market power Amazon has. Paul Krugman is under the opinion that, as a monopsonist, “Amazon [has the ability to]… systematically [disadvantage] books with a particular political bent.” Mr. Krugman gives the book “Sons of Wichita” as an example of a book that is being disadvantaged in that particular way. In retaliation, the author argues that Amazon is not a monopoly in the U.S., citing Barns & Noble as a potential competitor. However, Krugman argues that it is not on the bookselling front that all Amazon’s power is concentrated: it is on the ‘buzz creating’ front, i.e. the ability to create buzz about a book. Once again, the author dismisses this point, saying that nobody hears about books through Amazon; it can neither create nor kill buzz on a large-scale. For these reasons, the author argues that Amazon is not as dangerous as others claim it is; its market power itself is not as abundant as it is portrayed to be.
Key words:
1. Monopsony: One big buyer for many sellers
2. Anti-trust action: Anti-monopoly law
Context:
1. R.A. (Ryan Arvent), the author, mentions Jean Tirole’s work on regulating monopolies. More about this can be read here.
2. A point of my own that I want to add that supports Krugman (although I agree with Arvent) is that Amazon might get some of its power from brand loyalty, as well as the fact that customers are accustomed to Amazon. Just like many people are hesitant to switch from Apple to Microsoft (or vice versa) because they may know one better, people may be hesitant to switch from Amazon to Barnes & Noble. In other words, although Arvent points out that there are many other online bookstores, just because consumers can switch, it does not mean that they will.
3. There is a similar famous antitrust law case in 2001 where the Department of Justice in the United States of America accused Microsoft Corporation of abusing its monopoly power. It claimed that Microsoft used its power to bundle Internet Explorer to the Microsoft Windows operating system, which may have been what caused Internet Explorer to be so successful. In the end, the Department of Justice required Microsoft to share its programme with other search engines. Wikipedia has a good synopsis of this case.
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