A few months ago we saw Amazon and Walmart and Target engaged in some aggressive price competition in the sale of on-line books. I haven’t heard to much on that front of late, so I assume that the dust has settled and those firms will fight another day. Amazon is back in the thick of things, this time aggressively defending its Ebook turf from the encroachment of Apple and its new iPad.
The book world is all a flutter. Here’s a note from one of friend of mine, who has intimate knowledge of the sordid dealings of the book world (edited for content; these book people drink like journalists and swear like sailors):
So this ebook pricing conflict is getting serious. Amazon has pulled all of Macmillan’s titles from its store — physical, ebook, etc. — in response to Macmillan wanting higher prices for some kindle editions than $9.99. So, for example, you can’t buy any Picador titles. That’s a lot of bestselling books.
[I’m not certain I agree with Amazon’s actions here]. To dictate $9.99 for all books and instill that price point in readers minds as the only appropriate ebook price is just ridiculous — especially when they’re losing money on every kindle edition they sell of a hardcover book.
So it’s about Macmillan trying to switch over the agency model of pricing, which is what Apple is offering with their new ibookstore. It makes a lot more sense than the distribution model that Amazon uses for ebooks.
Nothing like a good old fashioned price squabble to keep things interesting. I’m looking into the details of this “agency pricing” model and of course will let you know when I find out.
Stay tuned to this space.
Update: This stuff is so delicious I just want to take a big bite out of it. It appears to be more of a market power argument than a transaction costs argument. And it appears this may well have all come to a head with or without the iPad.
Thanks to my source, “The Big Stick,” for the tips.
Twelve students and four professors just finished lunch with five Lawrentians who have become successful consultants. During the three hours before lunch, we learned a lot about consulting, about careers in the consulting world, and about how Lawrence students can get their foot in the door. Students who came got invaluable advice and made connections with Lawrence alumni. If you weren’t there, you missed out–make sure you come to the next event on the banking industry on February 13th (Saturday of reading period). And you might want to take a look at the Pyramid Principle by Barbara Minto.
Speaking of the New York Times, you might have heard the buzz that they are going to begin charging for content. Will that save them? Well, as one critic put it, “Do you like getting pecked to death by ducks?”
It’s a pretty interesting piece, integrating some aspects of market structure, competition, innovation, and, yes, organizational adaptation.
Apple doesn’t even announce its tablet, and suddenly Amazon flips the deal on Kindle royalties to comport with Apple’s app world. Yup, yesterday Amazon said publishers would get 70% of revenue instead of 30%. Sure, there are caveats, you can read the fine print, but the point is Amazon could see the Apple juggernaut coming and adjusted. Where’s the adjustment at the “New York Times”?
Check it out. You might learn something along the way.
Alex Tabarrok has an op-ed in the Wall Street Journal discussing how various countries regulate the exchange &/or sale of human organs. Unfortunately, in the US the quantity supplied of organs is insufficient to meet the quantity demanded, and thousand of folks die each year waiting for a viable organ.
We talked about this a bit in Econ 300 this week, specifically discussing how Becker and Elias derive an estimated market-clearing price if organ trade were liberalized in the US. This is a really nice piece that really illustrates how economists think about what supply and demand curves represent.
I also highly recommend an accompanying article in the Journal of Economic Perspectives by Alvin Roth about how repugnance can constrain market exchange.
Anyone care to take a stab at estimating the consumer surplus generated from the price war blowing up between Amazon, Wal-Mart, and Target?
The price war began last week when Wal-Mart announced that it would offer Walmart.com customers who preordered any of 10 of the coming holiday season’s biggest potential best sellers the chance to buy the books in hardcover editions for just $10. Typically new hardcovers sell for $25 to $35, although some discounting is common.
Amazon.com quickly matched Wal-Mart’s preorder price on the same books, which include “Ford County” by Mr. Grisham, “Under the Dome” by Mr. King and “Going Rogue,” Sarah Palin’s memoir. Wal-Mart then lowered the price to $9, and Amazon followed suit. By late Friday afternoon Wal-Mart had cut another penny off the price.
On Monday, Target entered the fray by offering six of the preorder titles on Target.com for $8.99. By Tuesday Wal-Mart had lowered the price on those titles to $8.98.
Full story here
Interestingly, independent booksellers are claiming that this price competition “is damaging to the book industry and harmful to consumers.”
Well, I don’t know how damaged consumers are by paying half price for hardcover books, but it is certainly won’t be good for independent booksellers.