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