Harvard Law School
Antitrust scholars have widely debated the apparent paradox of Amazon seemingly wielding monopoly power while offering low prices to consumers. A single company’s behavior thereby helped spark an intellectual renaissance as scholars debated why Amazon’s prices were so low, whether antitrust enforcers should intervene, and, eventually, how the field should be reformed for the era of large online platforms. One of the few things that all parties have agreed upon amidst those contentious conversations is that Amazon offers low prices. This Article challenges that assumption by demonstrating that Amazon charges higher prices than commonly understood. More importantly, unraveling the disconnect between perception and reality yields broader insights. One of the reasons why perceptions of Amazon’s pricing have remained disconnected from reality is that conversations about regulating Amazon have paid inadequate attention to behavioral economics. Behavioral economics reveals how the company leverages its sophisticated algorithms and large datasets to build a marketplace of consumer misperception by, for instance, making it difficult to find the lowest prices. Such practices undermine competition, in the uncontroversial economic sense of the word. But these practices reside in the domain of consumer law, not antitrust. Thus, a behavioral consumer lens is necessary to see that what was originally framed as an antitrust paradox is better viewed as a pricing paradox. To see the full set of concrete legal solutions for promoting competition in Amazon’s marketplace and beyond, it will be important to move consumer law out of antitrust’s shadows. These two bodies of law operating at full force offer the best chance for an era of open retail.
Rory Van Loo & Nikita Aggarwal,
Amazon's Pricing Paradox
Harvard Journal of Law & Technology
Available at: https://scholarship.law.bu.edu/faculty_scholarship/3645