But if the reward for success is just having Amazon come in and hoover up the money you would have gotten by launching a knockoff, then suddenly there's a lot less incentive to invest in novel products. That's true both for categories where Amazon is competing and ones where it isn't currently.
I wouldn't be surprised if Amazon's replacement product is sometimes modestly worse, because a) they don't have the kind of deep expertise in a product that the original creators do, and b) it doesn't have to be as good to get the money.
And then there's after-sale support. Amazon's customer support is atrocious. The one thing they're good at is taking things back. But anything more complex and it's a nightmare.
Once there is only one paper towel manufacturer left, what is to prevent it from raising prices?
Admittedly those are public utilities but the attitude seems to hold true in antitrust as well. Walmart is probably the best example there, or now Amazon as evidenced by TFA.
Sometimes I wonder why Walmart and Comcast are allowed to behave this way while T-Mobile is not. (EDIT: Google says “nevermind”: https://www.nytimes.com/2019/12/19/technology/sprint-t-mobil...)
As a super-obvious example, an accountant looking to cut costs at a hamburger chain might first suggest reducing the amount of meat or using old meat. But that reduces value as much or more than costs, so it's a bad optimization.
That depends on the significance of economies of scale and barriers to entry in a particular market. The term “natural monopoly” (as it’s used in economics) refers to a particular market where, because of barriers to entry, the optimal number of firms is one. Two firms would not be able to produce their good for cheaper than one firm.
I also suspect the notion of "natural monopoly" is oversold and too simple. Would it be more efficient if we had exactly one ISP for the country? In theory, yes, because then we only have to run one set of wires everywhere, and we'd get rid of a lot of duplicative equipment and staff. But in practice, monopoly and oligopoly ISPs are generally both expensive and bad. I just moved from a competitive area to a "natural monopoly" area; my internet now costs twice as much for 10% of the bandwidth, much lower quality, and much worse service.
I think that's because companies aren't static entities that reliably produce goods, even though that's what most people imagine. Instead they're temporary coalitions of individual actors hopefully prodded into optimal behavior by external forces like competition. Especially so given American business culture, which often refuses to recognize ways of thinking that might mitigate the problems.
Its kind of the same thing with Home Depot. I used to be able to buy quality hardware from a local store. Now all I have is Home Depot and they sell mostly imported junk hardware. I have to go somewhere like McMaster-Carr now for quality hardware. Home Depot has not been good for me, Home Depot has only been good for itself.
The other problem the article and parent comments are describing relates to the distributor/retailer creating or sourcing generic alternatives to the items sold by their existing suppliers and informing their decisions to do so based on the sales data from their own partners/suppliers.
This latter case seems ok to me, even if it sucks for suppliers, in the sense that we generally get better outcomes for customers. As long as the general regulations for consumer protection are in-place such as preventing confusion between brands and generics.
For pharmacy items where there is some regulation around the quality of the product, I find generics/store brands to be great. For products that are not regulated in some way quality is all over the place. If you search Amazon for "ul listed usb charger" you will mostly see results for products that are not UL listed - there are probably 5 times more unlisted products for sale there than listed products - Amazon is pushing a bunch of cheap and high-profit crap at me even when I try to avoid it.
If you're right, then capitalism is hopelessly bad at optimization and we should scrap it. But what I think is more likely here is that Amazon's execs understands the economics of their business way better than a zero-karma free-market fundamentalist whose pseudonym is a genitalia joke.
Also, I only made fun of your username and your lack of karma because you were making absurd unevidenced claims like, "They have no power to raise prices and restrict competition." If you're going to say things like that, then it's not so much making a point as doing what Frankfurt calls bullshiting. [1] That combined with your very low karma suggests you're not really worth the time of a serious reply. Note the link in my bio: http://www.penny-arcade.com/comic/2004/03/19
In the long term, Amazon undercuts suppliers who have to exit the market. That reduces competition and allows Amazon to charge more.
that never happens, unless there's a regulation in place that prevents new sellers to get into the market as quickly as they can. When a price for the product begins to rise, it attracts new sellers, as now there's a wider price range to position your competing product.
You say it as if that was a bad thing. More competition is good for the consumer, bad for the oligopolists.
If you're hungry, a soda is "great for the consumer". For 15 minutes, it alleviates that feeling. Does it follow that everyone should consume only soda?