One obvious explanation is your assumption that their shipping rates are the same as yours and mine. They probably get ground rate discounts of 15-30% and air rate discounts of ~50%. Or from the carriers' point of view, why wouldn't you do a cost+5% deal to Amazon that's a $100 million a year account for UPS. What's UPS's incremental cost of having Amazon's account, when UPS has the entire distribution network already set up? That's how A does it.