Amazon’s Pricing Paradox

By Rory Van Loo, Nikita Aggarwal, Yale University & UCLA School of Law

Amidst contentious debates about whether Amazon wields excess market power to harm competitors, one of the few things that most parties have agreed upon 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 search algorithms and large data sets 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 largely reside in the domain of consumer law, not antitrust. 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 together offer the best chance for an era of open retail.

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