> Take an industry with healthy competition like restaurants. You can compete in price, quality, format, service and probably a lot more.

Yes, and you correctly point out: On the average restaurant visit, nothing stands out. A good restaurant only needs to provide not-terrible food and not-terrible service to be almost indistinguishable from all others. Quality of a restaurant visit is hard to measure and compare. Price is easy to measure. Thus, the rational consumer will prefer the cheaper option (and even at the same price, a restaurant with lower costs will be more profitable, thus expand more easily).

The same thing happens on Amazon and other market places: When it is difficult to compare quality, price always wins out. Some products are interchangeable with well defined specs, like a 16GB RAM stick is obviously twice as good as 8GB RAM and so it can be twice as expensive and still sell. But when I'm looking for a new light for my bicycle there are no standardized specs to compare. All the product descriptions and pictures are exaggerated. I have no reliable information to tell if the lamp that is twice as expensive is really twice as good (and from personal experience: they never are), so I'm buying the cheapest one cause I expect all of the products to be equally crappy no matter the price.

It's not Amazon's fault. This happens everywhere.