by Mike Masnick
Mon, Aug 13th 2007 1:17pm
It's back to school season, and once again, students are getting gouged on textbooks. There are plenty of reasons for this. The biggest has been that you had inelastic demand. Students were required to buy the textbooks and, especially in a pre-internet age, there were usually only one or two sources where you could buy the books. That's started to change thanks to the internet, but the NY Times has an odd opinion piece suggesting that the inelastic demand has nothing to do with high book prices, and that it's all due to those damned used book sales. The idea presented by the accounting professor who wrote the article is that book publishers have to sell textbooks at an insanely high price in order to capture the profits from the additional sales afterwards. That may make sense from an accounting standpoint, but it doesn't hold up under an economic analysis. You might be able to make the case that thanks to used book sales, students are more willing to pay the high price for a book knowing they can resell it at the end of the semester and recoup some of the costs. However, the idea that the book publisher is baking in all that extra profit to offset future resales ignores the fact that the market should squeeze out that extra margin -- if there was a real free market. The professor's suggestion that school's simply buy site licenses to textbooks and have the schools pay a set fee per student is an interesting one that could make sense in some circumstances, but hardly seems likely to cure the problem of high prices. If anything, it gets rid of the competitive price pressures of the market, and simply opens up additional opportunities for publishers to gouge even more by charging higher rates while knowing there were no substitute products (used books) in the market.
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