> Why cut revenue to nearly half?

Because, to quote Jeff Bezos, your margin is my opportunity. And did he ever squeeze every drop from that opportunity. Just ask the brick and mortar stores in your street.

> I’m not convinced that basic economics works when output capacity isn’t fully scalable.

Economics works for land, which isn't scalable.

> Same reason no lawn care team tries to deeply undercut competitors

That works right up until Fred down the road loses his job, and then it dawns he could be making more money with his mower because of those sweet fat margins those other lawn care people thought they could keep all to themselves.

That’s an uncompetitive market. No one can outcompete on service, so they can only compete on price, but why would you in such a circumstance, it would only hurt you, so nobody does.

This is what people seem to forget... you don’t need monopolies or collusion for markets to be uncompetitive. Collusion works fundamentally because participants aren't competing with each other... not for the fact people made a secret agreement. It is entirely possible for markets to be completely uncompetitive even without a monopoly or any collusion going on.

Your examples here are better known amongst economists as the Bertrand–Edgeworth model (https://en.wikipedia.org/wiki/Bertrand%E2%80%93Edgeworth_mod...)