What Is The Appropriate Market For Analyzing Amazon’s Alleged Power?

The current debate over whether Amazon holds the power of a monopolist or a monopsonist is likely to be narrowed to one question in a court room: What is the relevant product market that Amazon is allegedly dominating? Since our last post on the Amazon and Hachette dispute, there has been increased discussion in the general press, culminating with 2008 Nobel Prize winner for economics Paul Krugman telling readers of the New York Times that Amazon is a monopsonist.

Others writing in the general press disagree, arguing that Amazon has many competitors. As Annie Lowrey wrote in New York Magazine, choosing the books business as the relevant market is "cherry-picking." She contends the relevant market might be e-commerce sales, where Amazon reportedly has 15 percent of the total market. And among traditional retailers, Lowrey states Amazon has "but a tiny slice" of the market, and Matthew Yglesias notes at Vox that Amazon "faces fierce competition."