The New York Times has an article on Amazon's recent push into competing directly with both book publishers and authors agents. This is similar to the vertical separation and vertical integration model from class. If the firms have market power and are vertically separated (independent) then each of the firms has the incentive and ability to mark up prices above their marginal costs. On the other hand, if the firms are integrated then the number of successive mark-ups drops and so would the overall price.
In the article, with Amazon now directly negotiating with authors, this could remove one more of those successive steps in the vertical book market, and possibly result in a decline in prices to book consumers.
Wednesday, October 31, 2012
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