What are the major public policy issues in pricing? Does Amazon practice predatory pricing or just good competitive marketing?

The major public policy issues with predatory pricing are that it drives out competition, creates a monopoly situation, and can lead to unfairly high prices. Amazon has long been accused of predatory pricing by using its market dominance to charge overly high fees to third-party sellers who want to sell through its e-platform. If Amazon's intent is to create a monopoly situation, this goes against merely good competitive marketing.

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Predatory pricing occurs when one company uses its market dominance or extra wealth to lower the price of a product or service with the intent of driving competitors out of business. The predatory pricer has the money in the bank to ride out a period of high losses while it waits for its competitors to go bankrupt or give up and drop out of the market.

The main public policy issue is that in the long run, predatory pricing hurts consumers. Prices for a product might dip temporarily, but the winning company will inevitably increase prices to recoup losses once it has driven out the competition. A closely related public policy issue is that predatory pricing can create a monopoly by driving out competitors, allowing the winner to charge sky-high prices people have no choice but to pay. This is inherently anticompetitive and hence anticapitalistic, as capitalism depends on open markets. However, overregulating business can also have a negative impact, so public policymakers have to walk a fine line.

Amazon has long been accused of predatory pricing, though it has done this in a way that disguises what it is really doing, according to its accusers. They argue that since Amazon is the dominant distributor in e-retail, many companies are forced to sell through it. If they don't, their products can remain invisible to the huge numbers of buyers who turn to Amazon for their consumer needs.

However, many wholesalers complain that Amazon makes arbitrary demands on them to buy high-priced marketing services and charges them high fees simply for carrying their products. Because Amazon can charge so much simply to carry third-party products, they can then sell these products at a loss: their money is coming from fees, not sales. Whether this is illegal or not, the true picture is still unclear. However, it is very clear the Amazon dominates the e-retail market in a way that demands very close scrutiny.

Where Amazon is abusing its power to create a monopoly situation and then then charge third parties excessive fees and using this to sell at a loss, it has gone beyond good competitive business practices.

Last Updated by eNotes Editorial on

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