Amazon is the leading player in e-books market, and maintains about 65% market share right now, and had 90% market share once. The cause for this downfall is claimed to be a collusion between Apple and top 5 leading publishers which led to an increase in the prices of e-books. The basis for an anti-trust lawsuit is typically high prices which leads to loss of consumer surplus, its best practice is to have a healthy competition in the market which protects consumer rights [refer to US-Airways and AA merger lawsuit story, at CNN].
|Amazon Kindle vs Apple iPad (ebook wars) source: Guardian|
There are several questions of interest:
- How upstream contracts affect downstream pricing in a competition?
- Given an incumbent and an entrant, what should be the strategy (pricing, contractual) of entrant to be successful in - (a) short run (b) long run?
- How can 1 and 2, be implemented without conflicting with RPA (robinson-patman act) ?
- What should be the amount of Govt. intervention in technologically evolving markets?