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Depends on a variety of factors.
Could it be abused? Yes. But so can any other system.
From a publisher's perspective, Apple's agency pricing terms (70% royalties to publishers) was a boon. At the time, Amazon was only offering 35% royalties.
Of course this is also be tempered by the fact that Amazon has various terms that significantly favor the price point they want for the consumer. For example, publishers only receive 70% royalties from Amazon for books priced between $2.99 ~ $9.99 (with caveats... if the buy is outside of the US and select countries, it goes down to 35%). That's why Amazon is generally a bad ecosystem for eBooks priced above $9.99. It's why Baen's eBook bundles aren't stocked there. Or why some nonfiction books aren't available at Amazon.
Amazon in general though has played the long-term game. It was founded in 1996 and didn't make a profit until 2003.
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