E-Books: A Tale of Digital Disruption
Forthcoming, Journal of Economic Perspectives
26 Pages Posted: 20 Jul 2015
Date Written: July 14, 2015
Abstract
E-book sales surged after Amazon introduced the Kindle e-reader at the end of 2007 and accounted for about one quarter of all trade book sales by the end of 2013. Amazon’s aggressive pricing led to allegations that e-books were bankrupting brick-and-mortar book booksellers. Amazon’s commanding position as a bookseller also raises concerns about monopoly power and publishers are concerned about Amazon’s power to displace them in the book value chain. I find little evidence that e-books are primarily responsible for the decline of independent booksellers. I also conclude that entry barriers are not sufficient to allow Amazon to set monopoly prices. Publishers are at risk from Amazon’s monopsony (buyer) power and they adopted agency pricing in an effort to promote retail competition and reduce Amazon’s influence as an e-retailer. Although challenged by the Department of Justice, agency pricing may yet prevail in some form as an equilibrium pricing model for e-book sales.
Keywords: E-books, resale price maintenance, abency pricing, monopsony, monopoly
JEL Classification: L11, L12, L22, L42, L82
Suggested Citation: Suggested Citation