Matthew Yglesias:
In any line of business where you’re earning healthy profits you
always need to worry that a competitor will undercut you on price.
But normally you can also have some confidence that they’ll be
restrained in their price cutting by the need to maintain profits
of their own. Amazon is totally off the leash in this regard. Wall
Street treats it like a brand new startup that just needs to think
about growth and can find a viable business model later. Which
means that if they come after you, you have no recourse. Your
profits are going to shrink, and your investors are going to
punish you for it but Amazon’s profits don’t necessarily need to
grow proportionally. They just need to show they can poach your
market share.
DIGITAL JUICE
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