With its low profit margin amazon leaves virtually no room for a small size competitor to dislodge them from their share of the market.

Say you want a bite of the tablet market dominated by apple, it's easy, make a somewhat decent tablet for cheap and there you have it.

If you want a bite of an amazon dominated market, well good luck with that, and while at it hope that amazon is not planning to get into the market you're in.

It seems their strategy relies on tiny margins, maybe with a different set or circumstances amazon would change their stance, but I don't think it's currently part of their plans to ramp up prices.

No, they're using low margins to keep market share, indefinitely.

There was an article on HN a couple of weeks ago precisely about this topic, decent read / informative.

Link: http://www.eugenewei.com/blog/2012/11/28/amazon-and-margins

HN Discussion: http://news.ycombinator.com/item?id=5112998

From Amazon's perspective, it's the only way to exist in the long term. If they keep costs and margins low, they don't give their competitors much breathing room to challenge them on price.

which has never worked in history. as soon as you raise prices, you lose market share...

I'm sure it's just a typo. But for the record, it's "bait and switch". A 'bate and switch model is something else entirely.

More likely the other way around. Destroy the competition and keep prices the same, but push costs down.