What happens to fast growing startups tends to surprise even the founders. Small variations in growth rate produce qualitatively different outcomes.
Amazon is the titan of twenty-first century commerce. In addition to being a retailer, it is now a marketing platform, a delivery and logistics network, a payment service, a credit lender, an auction house, a major book publisher, a producer of television and films, a fashion designer, a hardware manufacturer, and Market competition essay leading host of cloud server space.
Although Amazon has clocked staggering growth, it generates meager profits, choosing to price below-cost and expand widely instead. Through this strategy, the company has positioned itself at the center of e-commerce and now serves as Market competition essay infrastructure for a host of other businesses that depend upon it.
Specifically, current doctrine underappreciates the risk of predatory pricing and how integration across distinct business lines may prove anticompetitive. These concerns are heightened in the context of online platforms for two reasons.
First, the economics of platform markets create incentives for a company to pursue growth over profits, a strategy that investors have rewarded.
Under these conditions, predatory pricing becomes highly rational—even as existing doctrine treats it as irrational and therefore implausible. Second, because online platforms serve as critical intermediaries, integrating across business lines positions these platforms to control the essential infrastructure on which their rivals depend.
This dual role also enables a platform to exploit information collected on companies using its services to undermine them as competitors.
Lynn for introducing me to these issues in the first place. For thoughtful feedback at various stages of this project, I am also grateful to Christopher R. All errors are my own.
Customers celebrated and the competition languished. Nevertheless, a segment of shareholders believed that by dumping money into advertising and steep discounts, Amazon was making a sound investment that would yield returns once e-commerce took off.
Each quarter the company would report losses, and its stock price would rise. Ponzi Scheme or Wal-Mart of the Web? Although Amazon has clocked staggering growth—reporting double-digit increases in net sales yearly—it reports meager profits, choosing to invest aggressively instead.
Due to a change in legal thinking and practice in the s and s, antitrust law now assesses competition largely with an eye to the short-term interests of consumers, not producers or the health of the market as a whole; antitrust doctrine views low consumer prices, alone, to be evidence of sound competition.
By this measure, Amazon has excelled; it has evaded government scrutiny in part through fervently devoting its business strategy and rhetoric to reducing prices for consumers.
With its missionary zeal for consumers, Amazon has marched toward monopoly by singing the tune of contemporary antitrust. Focusing on these metrics instead blinds us to the potential hazards. My argument is that gauging real competition in the twenty-first century marketplace—especially in the case of online platforms—requires analyzing the underlying structure and dynamics of markets.
Rather than pegging competition to a narrow set of outcomes, this approach would examine the competitive process itself. This is the approach I adopt in this Note.
Part I gives an overview of the shift in antitrust away from economic structuralism in favor of price theory and identifies how this departure has played out in two areas of enforcement: Part II questions this narrow focus on consumer welfare as largely measured by prices, arguing that assessing structure is vital to protect important antitrust values.
The Note then assesses how antitrust law can address the challenges raised by online platforms like Amazon. Part V considers what capital markets suggest about the economics of Amazon and other internet platforms.
Part VI offers two approaches for addressing the power of dominant platforms: In this Part, I trace this history by sketching out how a structure-based view of competition has been replaced by price theory and exploring how this shift has played out through changes in doctrine and enforcement.
Broadly, economic structuralism rests on the idea that concentrated market structures promote anticompetitive forms of conduct.
This market structure-based understanding of competition was a foundation of antitrust thought and policy through the s. Subscribing to this view, courts blocked mergers that they determined would lead to anticompetitive market structures.
In some instances, this meant halting horizontal deals—mergers combining two direct competitors operating in the same market or product line—that would have handed the new entity a large share of the market. The Chicago School approach bases its vision of industrial organization on a simple theoretical premise: A failure to act in this fashion will be punished by the competitive forces of the market.Disclaimer: This essay has been submitted by a student.
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Disclaimer: This essay has been submitted by a student. This is not an example of the work written by our professional essay writers. You can view samples of our professional work here. Any opinions, findings, conclusions or recommendations expressed in this material are those of the authors and do.
Markets Nobel Laureate Economists Say Free Market Competition Rewards Deception and Manipulation What markets and government do for us. March (This essay is derived from a talk at the Harvard Computer Society.) You need three things to create a successful startup: to start with good people, to make something customers actually want, and to spend as little money as possible.
The Essay Prize Competition. An essay contest in three stages, open to all current full-time registered students in an undergraduate architecture degree program, undergraduates majoring in architecture, or diploma students in accredited schools of architecture worldwide.
Amazon got big fast, hastening the arrival of digital publishing.
But how big is too big?