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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 a decrease of wholesale prices compared with the case of full information, thus enabling the bookshop to compete with lower-priced blockbusters. Uncertainty thus increases both industry profits and consumer surplus. A fixed book price further increases consumer surplus and profits of non-blockbuster publishers, at the expense of those who get a blockbuster.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 40308.

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Date of creation: 22 Sep 2010
Date of revision: 22 Sep 2010
Handle: RePEc:pra:mprapa:40308

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Related research

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

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References

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  1. Marcel F. M. Canoy & Jan C. van Ours & Frederick van der Ploeg, 2005. "The Economics of Books," CESifo Working Paper Series 1414, CESifo Group Munich.
  2. Frederick van der Ploeg, 2004. "Beyond the Dogma of the Fixed Book Price Agreement," Journal of Cultural Economics, Springer, Springer, vol. 28(1), pages 1-20, February.
  3. Deneckere, R. & Marvel, H.P. & Peck, J., 1995. "Demand Uncertainty and Price Maintenace : Markdowns as Destructive Competition," Working papers, Wisconsin Madison - Social Systems 9507, Wisconsin Madison - Social Systems.
  4. Dixit, Avinash K & Stiglitz, Joseph E, 1975. "Monopolistic Competition and Optimum Product Diversity," The Warwick Economics Research Paper Series (TWERPS) 64, University of Warwick, Department of Economics.
  5. Howard P. Marvel & Raymond Deneckere & James Peck, 1995. "Demand Uncertainty and Price Maintainance: Markdowns as Destructive Competition," Working Papers, Ohio State University, Department of Economics 018, Ohio State University, Department of Economics.
  6. 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, Elsevier, vol. 8(1), pages 115-141.
  7. 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.
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