Amazon Prime – an example of price discrimination?

On Friday, February 18^th 2022, the retail giant, Amazon is raising its “Amazon Prime” service rates for new customers from $119 per year to $139 per year. The increase also applies to the Amazon Prime Student memberships from $59 annually to $69 per year for students who take at least one course at a college in the country including Puerto Rico.

Key perks of the Amazon Prime services include

• Free same-day delivery in select areas for orders $35 or more
• Prime Video – instant access to thousands of movies and TV shows
• Amazon Music – unlimited ad-free access to more than 1 million songs
• Prime Photos, Prime Gaming, Prime Reading, Amazon Pharmacy and much more!

This premium service was launched in 2005 and had membership worldwide. This is the first increase in rates since 2018 and the key reasons cited by Amazon’s CEO, Andy Jazzy are “… we saw higher costs driven by labor supply shortages and inflationary pressures, and these issues persisted into the first quarter (of 2022) due to Omicron.”        

Discussion Questions:  

1. View the online video, “Market Structures” for a quick recap.
   Comment if Amazon is a monopoly in providing online shopping services? Do explain using 2 key features of monopoly from the video.
2. View the online video on “Price Discrimination” practiced by monopoly firms.
   Do you think Amazon Prime is an example of 1^st, 2^nd, or 3^rd degree price discrimination? Do explain your choice with 2 related characteristics of the chosen price discrimination concept from the video.

• Self-reflection:
  • What 2 types of price discrimination have you experienced?
    (e.g., out-of-state versus in-state tuition differences, lower ticket prices at movie theaters during the week, coupons used at a supermarket, etc.)
  • Do YOU understand now why price discrimination happens?
  • With this knowledge in hand, do you plan to avoid or take advantage of price discrimination going forward? Do explain

Sources:

ConsumerReports.com: Pros and Cons of Amazon Prime, YouTube.com: Izzy Brown: Market Structures, Vimeo.com: Economics Online: Price Discrimination, Photo by Tumisu on Pixabay.com