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Fixed, Focal, Fair? Book Prices Under Optional Resale Price Maintenance

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  • Jonathan Beck

Abstract

In media markets, products are highly differentiated but prices are often bunched at apparent focal points. I use a comprehensive cross-section data set on the German book market to assess whether such focal points are a result of upstream coordination and whether the option to impose resale price maintenance (RPM) played a facilitating role. Therewith, I provide empirical evidence to a long-lasting policy debate. Results suggest that focal prices are used to coordinate competition rather than collusion. Focal prices are mostly lower than expected from hedonic projections. In cases where the decisions on focal pricing and RPM are positively correlated, controlling for endogeneity and a number of other factors, RPM does not seem to facilitate above average focal pricing in particular. ZUSAMMENFASSUNG - (Fixiert, fokal, fair? Buchpreise bei optionaler Preisbindung) Produkte in Medienmärkten sind hochgradig differenziert, Preise sammeln sich jedoch häufig an augenscheinlich fokalen Punkten. Ich verwende einen umfassenden Satz von Querschnittsdaten aus dem deutschen Buchmarkt, um zu untersuchen, ob derartige Fokalpunkte das Ergebnis von Koordination auf der Verlagsseite sind und ob optionale Preisbindung eine begünstigende Rolle dabei spielte. Damit bereichere ich eine langlebige Politikdebatte mit empirischer Evidenz. Die Ergebnisse legen nahe, dass Fokalpreise eher der Koordination von Wettbewerb als Kollusion dienen. Fokalpreise sind meistens niedriger als von hedonischen Projektionen erwartet. In den Fällen, in welchen die Entscheidungen über fokale Preissetzung und Preisbindung positiv korreliert sind, unter Kontrolle des Einflusses von Endogenität und einer Reihe von anderen Faktoren, scheint optionale Preisbindung die Setzung von überdurchschnittlichen Fokalpreisen nicht insbesondere zu begünstigen.

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Bibliographic Info

Paper provided by Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG) in its series CIG Working Papers with number SP II 2004-15.

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Length: 55 pages
Date of creation: Dec 2004
Date of revision:
Handle: RePEc:wzb:wzebiv:spii2004-15

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Keywords: resale price maintenance; focal prices; vertical restraints; collusion; simultaneous probit; book industry.;

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Citations

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Cited by:
  1. Beck, Jonathan, 2009. "Diderot's rule," MPRA Paper 17404, University Library of Munich, Germany.
  2. Aguzzoni, Luca & Argentesi, Elena & Ciari, Lorenzo & Duso, Tomaso & Tognoni, Massimo, 2013. "Ex-post merger evaluation in the UK retail market for books," DICE Discussion Papers 98, Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
  3. Glowicka, Ela, 2006. "Effectiveness of bailouts in the EU," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 176, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  4. Jonathan Beck, 2006. "The Sales Effect of Word of Mouth: A Model for Creative Goods and Estimates for Novels," CIG Working Papers SP II 2006-16, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).

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