Friday, September 30, 2016

Is Amazon integrating backward?

TOPICS: Microeconomics
SUMMARY: To constrain rising shipping costs, the online giant Amazon.com is building its own delivery operation, showing the extent of its ambition and also setting up a clash with the company's shipping partners.
CLASSROOM APPLICATION: Students can analyze three economics issues in Amazon's entry into the delivery business: economies of scale, barriers to entry, and delivery reliability.
QUESTIONS: 
1. (Advanced) How does Amazon help UPS and FedEx lower the cost per package delivered?

2. (Advanced) What are the barriers to entry into the delivery business?

3. (Introductory) Why is the reliability of package delivery, especially during the holiday season, important to Amazon?
Reviewed By: James Dearden, Lehigh University

Some questions
  1. Why do analysts say, "Keeping packages under its own control just over longer distances could save Amazon around $3 or more on a typical delivery"?
  2. What specialized investments occur when Amazon uses UPS for delivery services?
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