Final answer:
Price setting at Walmart involves squeezing vendors to maintain low prices, posing challenges related to sustainability and supplier treatment. Amazon has outcompeted in the book industry through a cost structure that includes lower prices and absorbed shipping costs. Regulatory bodies examine detailed market impacts, as seen in the FTC's conditional approval of the Whole Foods and Wild Oats merger.
Step-by-step explanation:
Price setting has been a significant challenge for Walmart, particularly in its strategy of maintaining low prices. This approach requires Walmart to exert pressure on its vendors to supply goods at the lowest possible prices to pass savings on to consumers. A functionalist would examine Walmart's model within the context of the broader economic system, noting how it allows Walmart to provide affordable goods to core nation consumers, although it may raise concerns about the sustainability and ethics of such pressure on suppliers.
When considering Amazon's impact on the book selling industry, its ability to crush competition is due in large part to its innovative production model and cost structure. This enables Amazon to offer lower prices over competitors, including absorbing shipping costs, thus making it a dominant player in the market.
The concept of market definition is vital in understanding competitive dynamics. Regulatory bodies like the Federal Trade Commission (FTC) scrutinize mergers, such as the proposed union between Whole Foods and Wild Oats, to ensure that competition is not unduly hindered. Evidence of impacts on profits and prices in various cities informed the FTC's decision to require the divestment of stores and the Wild Oats brand to safeguard competitive markets after their eventual merger approval in 2009.