(Post by Jinho Suk, Jungmoo Park, Sangouk Kim, Allan Jaenicke, & Arkajit Dey)
The market for digital textbooks is expected to grow exponentially over the coming years, but we see the current approach to pricing as a significant barrier to rapid growth.
In particular, we have focused on the effect of the strong 2nd hand textbook market. A survey conducted at MIT Sloan shows that 60% of textbooks are purchased 2nd hand. Through mining Amazon.com pricing data, we conclude that the presence of the 2nd hand market has a significant impact on pricing. On the one hand, it has the effect of raising prices through indirect appropriability: Books can be resold at around 70% of the original price. We also see less price competition and less variation in pricing across new, used and digital formats then e.g. in the ‘fiction’ category, which has a weaker 2nd hand market.
Below is an example of our findings: