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Beyond the Dogma of the Fixed Book Price Agreement

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  • Frederick van der Ploeg

Abstract

After describing the essential features of the book market, a welfare analysis of the fixed book price agreement is given. Allowance is made for the opportunity cost of reading. Theoretically, the agreement pushes up book prices and depresses book sales. However, more titles will be published, particularly of books with low price elasticity and that take a long time to read. Potential advantages of better service, distribution and retail networks seem less relevant. The book market is one of imperfect competition, but even so the cross-subsidy argument is unlikely to be valid. A qualitative analysis of the Dutch situation is given. Tentative conclusions are that one should be more concerned about the number of well-stocked bookshops than the diversity of published titles and that debutantes do not face big barriers to entry. One should be even more concerned about the falling proportions of people reading books. Governments fail to set (quantitative) objectives for the fixed book price agreement, which makes it difficult to evaluate its success and contributes to it being treated as a dogma in the book world and the political arena.

Suggested Citation

  • Frederick van der Ploeg, 2003. "Beyond the Dogma of the Fixed Book Price Agreement," CESifo Working Paper Series 949, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_949
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    References listed on IDEAS

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    1. Deneckere, Raymond & Marvel, Howard P & Peck, James, 1997. "Demand Uncertainty and Price Maintenance: Markdowns as Destructive Competition," American Economic Review, American Economic Association, vol. 87(4), pages 619-641, September.
    2. N. Gregory Mankiw, 1985. "Small Menu Costs and Large Business Cycles: A Macroeconomic Model of Monopoly," The Quarterly Journal of Economics, Oxford University Press, vol. 100(2), pages 529-538.
    3. Steven Salop & Joseph Stiglitz, 1977. "Bargains and Ripoffs: A Model of Monopolistically Competitive Price Dispersion," Review of Economic Studies, Oxford University Press, vol. 44(3), pages 493-510.
    4. Howard P. Marvel & Stephen McCafferty, 1984. "Resale Price Maintenance and Quality Certification," RAND Journal of Economics, The RAND Corporation, vol. 15(3), pages 346-359, Autumn.
    5. Frank Mathewson & Ralph Winter, 1998. "The Law and Economics of Resale Price Maintenance," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 13(1), pages 57-84, April.
    6. Holahan, William L., 1979. "A theoretical analysis of resale price maintenance," Journal of Economic Theory, Elsevier, vol. 21(3), pages 411-420, December.
    7. George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, Oxford University Press, vol. 84(3), pages 488-500.
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    Citations

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    Cited by:

    1. Canoy, Marcel & van Ours, Jan C. & van der Ploeg, Frederick, 2006. "The Economics of Books," Handbook of the Economics of Art and Culture, Elsevier.
    2. repec:cpt:journl:v::y:2016:i:144:p:165-197 is not listed on IDEAS
    3. van der Ploeg, Frederick, 2006. "The Making of Cultural Policy: A European Perspective," Handbook of the Economics of Art and Culture, Elsevier.
    4. Gaffeo, Edoardo & Scorcu, Antonello E. & Vici, Laura, 2008. "Demand distribution dynamics in creative industries: The market for books in Italy," Information Economics and Policy, Elsevier, vol. 20(3), pages 257-268, September.
    5. Takahiro Endo, 2015. "Legal Structure, Business Organisations and Lobbying: The JapanesePublishing Sector, 1990-2001," Discussion Paper Series DP2015-19, Research Institute for Economics & Business Administration, Kobe University, revised Mar 2017.
    6. Perona, Mathieu, 2009. "Bookshop, blockbusters and readers’ tastes: a new appraisal of the fixed book price," MPRA Paper 17857, University Library of Munich, Germany.
    7. Nataliya Kochkina & Evgeniya Popova, 2017. "Are Books Luxury Goods in Russia or not?," ACEI Working Paper Series AWP-06-2017, Association for Cultural Economics International, revised Jul 2017.
    8. Productivity Commission, 2009. "Restrictions on the Parallel Importation of Books," Research Reports, Productivity Commission, Government of Australia, number 34.
    9. repec:pra:mprapa:40306 is not listed on IDEAS
    10. Juan Jiménez & Javier Campos, 2010. "Modelling Competition in the Textbook Market: Some Lessons still to Learn," Journal of Industry, Competition and Trade, Springer, vol. 10(1), pages 71-85, March.
    11. Fernández Blanco, Víctor & Prieto Rodríguez,Juan, 2009. "Análisis de los hábitos de lectura como una decisión económica/," Estudios de Economía Aplicada, Estudios de Economía Aplicada, vol. 27, pages 113-138, Abril.
    12. Françoise Benhamou & Stéphanie Peltier, 2007. "How should cultural diversity be measured? An application using the French publishing industry," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 31(2), pages 85-107, June.

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    Keywords

    book market; fixed price agreement; opportunity cost of reading; diversity; accessibility; competition policy;

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