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Bookshop, blockbusters and readers’ tastes: a new appraisal of the fixed book price

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  • Perona, Mathieu

Abstract

This paper models the book retail market as a dual market. Consumers choose between competitively retailed, well-identified blockbusters and going to a monopoly bookshop to find the best match for their tastes. I show that uncertainty about the status on a given title (will it be a blockbuster or not?) places publishers in front of a trade-off between low prices (valuable if they get a blockbuster) and high prices (in the other case). The main effect of this trade-off is that the presence of blockbusters almost never lead to bookshop foreclosure by blockbusters and that a higher number of blockbusters leads to lower price for all books and increased consumer surplus. A fixed book price mitigates the effects of blockbuster, transferring suplus from blockbuster byuers towards publishers, and leads to perfect matching between readers and tastes. When the number of titles and of blockbusters becomes largers however, the situations with and without FBP converge.

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File URL: http://mpra.ub.uni-muenchen.de/22551/
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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 17857.

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Date of creation: Oct 2009
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Handle: RePEc:pra:mprapa:17857

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Keywords: books; fixed book price; book economy; resale price maintenance;

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  1. Canoy, Marcel & van der Ploeg, Frederick & van Ours, Jan C, 2005. "The Economics of Books," CEPR Discussion Papers 4892, C.E.P.R. Discussion Papers.
  2. Ours, J. C. van, 1990. "Nederlandse boekenmarkt tussen stabiliteit en verandering," Open Access publications from Tilburg University urn:nbn:nl:ui:12-153370, Tilburg University.
  3. Frederick van der Ploeg, 2003. "Beyond the Dogma of the Fixed Book Price Agreement," CESifo Working Paper Series 949, CESifo Group Munich.
  4. Deneckere, R. & Marvel, H.P. & Peck, J., 1995. "Demand Uncertainty and Price Maintenace : Markdowns as Destructive Competition," Working papers 9507, Wisconsin Madison - Social Systems.
  5. Howard P. Marvel & Raymond Deneckere & James Peck, 1995. "Demand Uncertainty and Price Maintainance: Markdowns as Destructive Competition," Working Papers 018, Ohio State University, Department of Economics.
  6. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
  7. Perry, Martin K. & Porter, Robert H., 1990. "Can resale price maintenance and franchise fees correct sub-optimal levels of retail service?," International Journal of Industrial Organization, Elsevier, vol. 8(1), pages 115-141.
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