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Comment by wiremonger | Hacker News Reader

They (as in, Amazon) are not setting prices. The 3rd party sellers decide what the prices are: they can either lower the price on Amazon or raise the price at the other retailer. Amazon doesn't really care; they just want to sell stuff and take their cut. And ensure that customers don't develop a habit of price shopping everything after they do all their research on Amazon.

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By insulating themselves from price competition they indirectly increase prices seen by consumers.

Consider the counterfactual case: if there was an Amazon competitor with higher efficiency they could compete by offering a lower take-rate. Sellers could then sell the same product with the same margin at a lower price, and buyers would benefit from those lower prices.

Instead, Amazon is using its market power to prevent alternative stores from competing with it on price by hamstringing sellers. This means that while the sellers’ margin is exposed to competitive pressure, Amazon’s margin is not. And that means higher prices.

Counterfactual is a good term for the scenario you described since it is counter to the actual facts in this situation, which are that Amazon's referral fees are in line with all the other marketplaces and it's the 3rd party sellers who are setting prices, not Amazon.

Does it seem relevant that other marketplaces with lower marketshare can't reduce their take-rate to lower consumer costs and gain marketshare because sellers would have to raise their prices a corresponding amount if they want to stay on Amazon?

How would another marketplace lowering their referral fee cause sellers to raise their prices? They can either keep the extra margin at the marketplace with the lower fees, or they can reduce their prices at Amazon.

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