Digitization, Prediction and Market Efficiency: Evidence from Book Publishing Deals

Management Science

42 Pages Posted: 2 Feb 2018 Last revised: 11 Oct 2021

See all articles by Christian Peukert

Christian Peukert

University of Lausanne - Faculty of Business and Economics (HEC Lausanne)

Imke Reimers

Cornell SC Johnson College of Business

Multiple version iconThere are 2 versions of this paper

Date Written: August 13, 2021

Abstract

Digitization has given creators direct access to consumers as well as a plethora of new data for suppliers of new products to draw on. We study how this affects market efficiency in the context of book publishing. Using data on about 50,000 license deals over more than ten years, we identify the effects of digitization from quasi-experimental variation across book types. Consistent with digitization generating additional information for predicting product appeal, we show that the size of license payments more accurately reflects a product’s ex-post success, and more so for publishers that invest more in data analytics. These effects cannot be fully explained by changes in bargaining power or in demand. We estimate that efficiency gains are worth between 10% and 18% of publishers’ total investments in book deals. Thus, digitization can have large impacts on the allocation of resources across products of varying qualities in markets in which product appeal has traditionally been difficult to predict ex-ante.

Keywords: Digitization, Licensing Markets, Prediction, Book Publishing

JEL Classification: D22, D83, L82

Suggested Citation

Peukert, Christian and Reimers, Imke, Digitization, Prediction and Market Efficiency: Evidence from Book Publishing Deals (August 13, 2021). Management Science, Available at SSRN: https://ssrn.com/abstract=3110105 or http://dx.doi.org/10.2139/ssrn.3110105

Christian Peukert (Contact Author)

University of Lausanne - Faculty of Business and Economics (HEC Lausanne) ( email )

Switzerland

HOME PAGE: http://https://www.christian-peukert.com/

Imke Reimers

Cornell SC Johnson College of Business ( email )

Ithaca, NY 14850
United States

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