So far Amazon has not tried to exploit consumers. In fact, it has
systematically kept prices low, to reinforce its dominance. What
it has done, instead, is use its market power to put a squeeze on
publishers, in effect driving down the prices it pays for books —
hence the fight with Hachette. In economics jargon, Amazon is not,
at least so far, acting like a monopolist, a dominant seller with
the power to raise prices. Instead, it is acting as a monopsonist,
a dominant buyer with the power to push prices down.
And on that front its power is really immense — in fact, even
greater than the market share numbers indicate. Book sales depend
crucially on buzz and word of mouth (which is why authors are
often sent on grueling book tours); you buy a book because you’ve
heard about it, because other people are reading it, because it’s
a topic of conversation, because it’s made the best-seller list.
And what Amazon possesses is the power to kill the buzz. It’s
definitely possible, with some extra effort, to buy a book you’ve
heard about even if Amazon doesn’t carry it — but if Amazon
doesn’t carry that book, you’re much less likely to hear about it
in the first place.