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

Perona, Mathieu (2009): Bookshop, blockbusters and readers’ tastes: a new appraisal of the fixed book price.

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: books; fixed book price; book economy; resale price maintenance
• Subjects: L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L11 - Production, Pricing, and Market Structure ; Size Distribution of Firms; L - Industrial Organization > L4 - Antitrust Issues and Policies > L42 - Vertical Restraints ; Resale Price Maintenance ; Quantity Discounts; Z - Other Special Topics > Z1 - Cultural Economics ; Economic Sociology ; Economic Anthropology > Z11 - Economics of the Arts and Literature

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