Question

Examine how the market structure impacts Amazon’s performance in each industry

Answer 1

While the majority of the goods and services provided by Amazon.com can be either found at another online retailer or at your local market, Amazon.com, has made their focus to make shopping, reading, listening to music, and even watching television more and more convenient for its consumers.

Amazon.com is an example of an oligopoly. As Amazon has its own brand value, the company is able to set their own prices for many other different brands based on the demand of certain goods and services.

Amazon.com takes an aggressive approach to drastically reduce pricing as the holiday season approaches. The products that are targeted for price decreases include the most gifted items such as toys and consumer electronics. There are many competitors in the same market structure as Amazon; including, but not limited to Target, Wal-Mart, Toys R Us and Goldman Sachs. Amazon.com beats its competitors when it comes to electronics.

The kinked-demand curve explains why firms in an oligopoly resist changes to price. If one of them raises the price, then it will lose market share to others. If it lowers its price, then the other firms will match the lower price, causing all of the firms to earn less profit. Amazon has done a great job keeping the Kindle at an affordable price for most consumers. The company has been successful in the profit maximization of the e-reader by keeping it at reasonable price.