I would say that they mainly focus on 1). Best analogy I have heard is think of the surface of the ocean as the equilibrium price for a good or entire market. Amazon forces their competition to dive down underneath the surface. The difference is Amazon has 10X as much oxygen (capital) as the rest. They simply wait for their competition to drown. They don't necessarily care about profit or raising prices, just market share at this point. Their stock price being so high makes it that much easier for them to have cheap access to capital.