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

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  • Perona, Mathieu

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.

Suggested Citation

  • Perona, Mathieu, 2010. "Bookshop, blockbusters and readers’ tastes: a new appraisal of the fixed book price," MPRA Paper 40308, University Library of Munich, Germany, revised 22 Sep 2010.
    • Handle: RePEc:pra:mprapa:40308
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    More about this item

    Keywords

    books; fixed book price; book economy; resale price maintenance;
    All these keywords.

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
    • Z11 - Other Special Topics - - Cultural Economics - - - Economics of the Arts and Literature

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