I think amazon knows perfectly well that they will lose customers by this. They're doing it so that at the next shareholder meeting, they can point at their declining revenues from prime and say "hey, look you idiots. We know what we're doing. leave us alone".

Amazon has always been very careful to make exactly as much profit as they choose to. Their sales volume is huge enough that they could probably raise an extra $500mm by tweaking their pricing algorithm without anybody even noticing, instead they have increased prices in the most visible way possible. This has to be about sending a message, not about making money.