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A Rationalization of Selecting Behavior to Release the Cheap Edition

Author

Listed:
  • Yuhki Hosoya

    (Department of Economics, Kanto-Gakuin University.)

Abstract

This article examines a specific sales technique employed by certain product suppliers (such as book or gaming software suppliers). Such suppliers release cheap editions (e.g., paperback versions following the initial hardcover edition) of only those products that had high sales volumes and not those that had low sales volumes. This behavior seems counterintuitive because the additional cost of producing such cheap editions is approximately zero (it is a significantly lower cost than releasing a new product) and the cheap editions will generate a profit even if they do not sell well. Hence, it would seem rational for a supplier to release a cheap edition of each of their products following the initial release. This article explains this behavior, showing that it is not necessarily irrational. We construct a differential equation comparable to the replicator dynamics of a strategic form game, and show that if a supplier's decision is biased then their payoff may be better than if it is not biased.

Suggested Citation

  • Yuhki Hosoya, 2015. "A Rationalization of Selecting Behavior to Release the Cheap Edition," Economics Bulletin, AccessEcon, vol. 35(4), pages 2617-2624.
    • Handle: RePEc:ebl:ecbull:eb-15-00466
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    File URL: http://www.accessecon.com/Pubs/EB/2015/Volume35/EB-15-V35-I4-P263.pdf
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    More about this item

    Keywords

    cheap edition; replicator dynamics; biased decision.;
    All these keywords.

    JEL classification:

    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • D2 - Microeconomics - - Production and Organizations

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