This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

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

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Jonathan Beck

Additional information is available for the following registered author(s):

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.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://skylla.wz-berlin.de/pdf/2004/ii04-15.pdf
File Format: application/pdf
File Function: Full text (original version)
Download Restriction: no

Publisher 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.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length: 55 pages
Date of creation: Dec 2004
Date of revision:
Handle: RePEc:wzb:wzebiv:spii2004-15

Contact details of provider:
Postal: Reichpietschufer 50, 10785 Berlin, Germany
Phone: (++49)(30) 25491-441
Fax: (++49)(30) 25491-442
Web page: http://www.wzb.eu/mp/wiw/default.en.htm
More information through EDIRC

For technical questions regarding this item, or to correct its listing, contact: (Jennifer Rontganger).

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

Other versions of this item:

Find related papers by JEL classification:
D4 - Microeconomics - - Market Structure and Pricing
L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media

This paper has been announced in the following NEP Reports:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Alberto HOLLY & Lucien GARDIOL & Gianfranco DOMENIGHETTI & Brigitte BISIG, 1998. "An Econometric Model of Health Care Utilization and Health Insurance in Switzerland," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 9803, Université de Lausanne, Faculté des HEC, DEEP.
    Other versions:
  2. Evans, William N & Schwab, Robert M, 1995. "Finishing High School and Starting College: Do Catholic Schools Make a Difference?," The Quarterly Journal of Economics, MIT Press, vol. 110(4), pages 941-74, November. [Downloadable!] (restricted)
  3. Maskin, Eric & Tirole, Jean, 1988. "A Theory of Dynamic Oligopoly, II: Price Competition, Kinked Demand Curves, and Edgeworth Cycles," Econometrica, Econometric Society, vol. 56(3), pages 571-99, May. [Downloadable!] (restricted)
  4. Symeonidis, George, 2002. "Cartel stability with multiproduct firms," International Journal of Industrial Organization, Elsevier, vol. 20(3), pages 339-352, March. [Downloadable!] (restricted)
    Other versions:
  5. Karen Clay & Ramayya Krishnan & Eric Wolff, 2001. "Prices and Price Dispersion on the Web: Evidence from the Online Book Industry," NBER Working Papers 8271, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  6. Christopher R. Knittel & Victor Stango, 2003. "Price Ceilings as Focal Points for Tacit Collusion: Evidence from Credit Cards," American Economic Review, American Economic Association, vol. 93(5), pages 1703-1729, December. [Downloadable!]
    Other versions:
  7. Varian, Hal R, 1980. "A Model of Sales," American Economic Review, American Economic Association, vol. 70(4), pages 651-59, September. [Downloadable!] (restricted)
  8. Kandel, Eugene, 1996. "The Right to Return," Journal of Law & Economics, University of Chicago Press, vol. 39(1), pages 329-56, April.
  9. Deneckere, Raymond & Marvel, Howard P & Peck, James, 1996. "Demand Uncertainty, Inventories, and Resale Price Maintenance," The Quarterly Journal of Economics, MIT Press, vol. 111(3), pages 885-913, August. [Downloadable!] (restricted)
    Other versions:
  10. repec:att:wimass:192026 is not listed on IDEAS
  11. Butz, David A, 1996. "Does the Per Se Rule Deter Vertical Price-Fixing?," Economic Inquiry, Oxford University Press, vol. 34(4), pages 770-80, October.
  12. Ken Binmore & Larry Samuelson, 2002. "The Evolution of Focal Points," Economics Working Papers 0017, Institute for Advanced Study, School of Social Science. [Downloadable!]
  13. D. Fabbri & C. Monfardini & R. Radice, 2004. "Testing exogeneity in the bivariate probit model: Monte Carlo evidence and an application to health economics," Working Papers 514, Dipartimento Scienze Economiche, Universita' di Bologna. [Downloadable!]
  14. Deneckere, Raymond J & Kovenock, Dan & Lee, Robert, 1992. "A Model of Price Leadership Based on Consumer Loyalty," Journal of Industrial Economics, Blackwell Publishing, vol. 40(2), pages 147-56, June. [Downloadable!] (restricted)
    Other versions:
  15. Sugden, Robert, 1995. "A Theory of Focal Points," Economic Journal, Royal Economic Society, vol. 105(430), pages 533-50, May. [Downloadable!] (restricted)
  16. Wang, Hao, 2004. "Resale price maintenance in an oligopoly with uncertain demand," International Journal of Industrial Organization, Elsevier, vol. 22(3), pages 389-411, March. [Downloadable!] (restricted)
  17. Rotemberg, Julio J & Saloner, Garth, 1990. "Collusive Price Leadership," Journal of Industrial Economics, Blackwell Publishing, vol. 39(1), pages 93-111, September. [Downloadable!] (restricted)
  18. Jullien, Bruno & Rey, Patrick, 2000. "Resale Price Maintenance and Collusion," CEPR Discussion Papers 2553, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  19. Salop, Steven & Stiglitz, Joseph E, 1977. "Bargains and Ripoffs: A Model of Monopolistically Competitive Price Dispersion," Review of Economic Studies, Blackwell Publishing, vol. 44(3), pages 493-510, October. [Downloadable!] (restricted)
    Other versions:
  20. Mehta, Judith & Starmer, Chris & Sugden, Robert, 1994. "The Nature of Salience: An Experimental Investigation of Pure Coordination Games," American Economic Review, American Economic Association, vol. 84(3), pages 658-73, June. [Downloadable!] (restricted)
  21. Ivaldi, Marc & Jullien, Bruno & Rey, Patrick & Seabright, Paul & Tirole, Jean, 2003. "The Economics of Tacit Collusion," IDEI Working Papers 186, Institut d'Économie Industrielle (IDEI), Toulouse. [Downloadable!]
  22. Frank Mathewson & Ralph Winter, 1998. "The Law and Economics of Resale Price Maintenance," Review of Industrial Organization, Springer, vol. 13(1), pages 57-84, April. [Downloadable!] (restricted)
  23. Feenstra, Robert C & Levinsohn, James A, 1995. "Estimating Markups and Market Conduct with Multidimensional Product Attributes," Review of Economic Studies, Blackwell Publishing, vol. 62(1), pages 19-52, January. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. 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). [Downloadable!]
    Other versions:
  2. Ela Glowicka, 2006. "Effectiveness of bailouts in the EU," Discussion Papers 176, SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich. [Downloadable!]
    Other versions:
Statistics
Access and download statistics

Did you know? You can use convenient plug-ins to search directly IDEAS from your browser.

This page was last updated on 2009-11-19.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.