6/30/2004

The Economics of books.

College is full of lots and lots of costs. Apartment, class, food, gas, and BOOKS! A single book can cost more than 100 dollars. But why so high? Well lets think about this. Did you know that book company's will actually send professors free books in the hope that the professor will like it and they can sell the book to all his students that HAVE to buy it regardless of price? The last thing the professor looks at is the how much it costs, I mean he's getting it for free so who cares. What he's looking for are some of his favorite subjects (the things he really likes to teach). So what do the book makers do? They fill the book with 20 chapters (much more than any class could cover in a semester) so that no matter what the professors "favorite" topics are they will almost certainly be covered. And along with a large book comes large cost. So because the book makers understand that all they have to do is impress the professor we get these big books with huge prictags. So all you professors out there, choose a small, cheap book and do us all a favor.

6 comments:

Dr. Tufte said...

Ahem.

It actually is almsot impossible to get a publisher to tell you how much they are going to retail a book for.

Even worse, the biggest markups are made by the college bookstores.

The textbook market is probably more akin to the winner-take-all problem discussed in class. Every publisher and author invests a lot to get the book to market in the hopes that they are the ones to make a million books. This raises the prices of all texts.

Textbook publishing also fits in with monopolistic competition, where in some sense the whole point of creating the product in the first place is to sell it at something far in excess of marginal cost.

Textbook prices also get pushed up by the fact that the print runs are small, there are fixed costs associated with switching to a new book, and the business is highly seasonal.

As to selling books to students, I'm sure some professors do that. I've never done it intentionally, but I get lots of books that are not marked "free" on them, and I'm sure I forget which is which and pocket some cash that I probably shouldn't. On the other hand, a professor's office is pretty close to a free lending library, so I assure you I am a big loser on the book score as a whole.

missydipadova said...

Interesting viewpoint Morty. I think that the college textbook market is close to having an inelastic curve. I mean no matter how you look at it, and no matter whether you pay full price for it or buy it at half.com, you still HAVE to buy it. It is a necessity. In essence, the demand for college textbooks is inelastic with regard to price. Anyone else have another way of looking at this?

The entrance of internet book retailers and things like that do make it a little easier on us and gives us (students) more control over the price we pay for our books.

Dr. Tufte said...

Missy has hit the nail on the head.

More broadly:
1) Inelastic demands tend to have more consumer surplus associated with them. This is confirmed by the huge difference in lifetime salary for college vs. high-school graduates.
2) But, presence of all that surpus is an invitation to firms that can price discriminate to do so. This means that they will turn the students' consumer surplus into their producer surplus (profits).

Trinity said...

Dr. Tufte said "It actually is almsot impossible to get a publisher to tell you how much they are going to retail a book for." This is true. I have actually spoken with a variety of teachers that are genuinely interested in the cost of texts to the students. I've had teachers that have picked books intentionally because they were cheaper and offered basically the same level of teaching. Give teachers some credit!

Jordan said...

Dr. Tufte said:

"...the biggest markups are made by the college bookstores."

There are other places you can go to buy your books. Missy mentioned HALF.com. My favorite is Amazon. As soon as other students start catching on and buying their books online, college bookstores will have to lower their mark-ups in order to compete. As long as we all buy our books at the college bookstore, they have a monopoly on our purchases.

Dr. Tufte said...

Nothing to add.