When Amazon, Target, and Walmart sell a book at well below wholesale price, they can’t be making money. So what are they doing? Attempting to hurt every other bookseller in every other city. James Surowiecki writes about the price war for The New Yorker.

The idea is to let your competitors know that you’re not eager to slash prices—but that, if a price war does start, you’ll fight to the bitter end. One way to establish that peace-preserving threat of mutual assured destruction is to commit yourself beforehand, which helps explain why so many retailers promise to match any competitor’s advertised price. Consumers view these guarantees as conducive to lower prices. But in fact offering a price-matching guarantee should make it less likely that competitors will slash prices, since they know that any cuts they make will immediately be matched. It’s the retail version of the doomsday machine.

(via ArtsJournal)