[spellbanisher]

The people appealing to “basic economics” are making assumptions that only hold true in highly abstract models. The notion that “price reflects what the market will bear” is based on many assumptions, including that publishers know the optimal market price (i.e. that they have perfect information and are perfectly rational). But there's no reason to believe these assumptions; when sales fail to meet expectation, publishers are just as likely to assume it is because of piracy or insufficient marketing as they are to assume it is because of mispricing. If they assume that piracy is the problem, they'll respond by developing inane DRM regimes that just alienate legitimate buyers, or by spending more money on congressional lobbying, neither of which does anything about mispricing. If they assume insufficient marketing, they'll end up just increasing cost without increasing revenues (and at that point they'll start blaming piracy).

Originally Posted by HarryT

This is nonsense. Virtually all the work that's involved in the production of a book (editing, layout, advertising, etc) is also there for an eBook. The only thing you don't have are the printing costs, which typically account for around 10-20% of total costs. An eBook that is priced 20% lower than the corresponding paperback is, therefore, reasonably priced.

Printing and production costs are variable depending on the success of the book. If a book sells a million copies, then virtually all of the costs will be printing and storage. If a book sells no copies, then all of the costs will be the fixed production. With digital, you don't have to worry about the cost of unsold copies either.

Originally Posted by nogle

The calculus is much simpler than all this. Let my desire to read a certain book expressed in dollars = D. let the price of the book in dollars = P

If D>P, then I buy the book. If D<P then I do not buy the book.

Production costs, royalties, profitability of the publisher, ability of the author to make a living from his/her writing etc. do not change my desire to read a book.

For a lot of people there are moral and social elements to spending; if there wasn't, corporations wouldn't spend millions on charity and then spend millions more advertising their charity spending to the world.

Anyways, your equation applied to other people would only be valid if it did not falsely assume that D is unaffected by the perceived fairness of the price.

Another factor to consider is consumer pathology caused by perceived unfair pricing. On the flip side there is what is called employee pathology, which means that when employees perceive that their compensation is unfair, they are more willing to steal from the company and slack off when unsupervised. Higher wages dramatically reduce the instances of employee pathology (indeed, the costs of higher wages are usually completely offset by reductions in employee pathology). In the same way, perceived unfair prices leads to higher social acceptance of activities such as copyright infringement.

Originally Posted by MrPLD

You're all missing the crux... It's not what the "real cost" of the book is that determines ebook sale price, it's what the market will tolerate.

But what people consider to be the “real cost” of the book contributes to what “the market will tolerate.” A “market” is just an abstraction to help people think about the millions of transactions that occur everyday between people, people whose buying decisions are influenced by context and a host of factors, including the perceived “real cost” of a book.

Anyways, the market doesn't really determine ebook sale price. In most industries (including ebooks) cost is determined first, and then price is set based on what the actor believes will cover cost plus desired profit. Most of what we think is the “true” market price of a good is determined by the price leader. Competitors compete with the price leader either by undercutting that price, or by innovation.[/quote]

Originally Posted by MrPLD

If people are happy paying 75% of the pBook cost for an eBook in sufficient numbers, then there's no real point in changing. Remember, it's business, and in business you do your best to maximise your margins. Having 50% of the market buying at 75% the pBook pricing is vastly better than 100% at 25%.

It's not about what's "right" ethically/morally - it's about maximising that revenue. Some see it as gouging, but they're in insufficient numbers to actually matter in the math.

Maybe, maybe not. It really depends on whether ebooks are a substitutable or niche good. By substitutable I mean a good that is very sensitive to price. If ebooks are a substitutable good, then even small changes in price would dramatically alter how people spend their entertainment dollars. If so, then publishers may be really hurting themselves with current prices.

If you believe ebooks are a substitutable product, then it is rational to complain about ebook prices, because high prices reduces the number of readers, which in turn could lead to a reduction in the number of books produced and published (although more likely just mean less money for superstars).

If they are a niche product, meaning a product will a loyal and devoted group of loyalist supporters, then gouge away, as that would be the most profitable route. For ebooks, I suspect in general that they resemble a niche product more than a substitutable product. Publishers make most if not all their money from superstar authors, and fans of these authors are usually willing to pay quite a bit for these works. Not 40 or 50 bucks, but I don't think the difference between 7.99 and 12.99 would alter the sales of a James Patterson, Dan Brown, or Stephanie Meyers all that much.

Nevertheless, even if ebooks were a niche product, it still is not crazy for ebook readers to complain about price. It may be profitable to gouge hardcore readers, but in more civilized circles we'd say that is “in bad taste.” People are not textbook abstractions, and in the long-run it is never wise to milk a group of people just because you can, even if they do look like cows.

Originally Posted by ballfresno

I just don't find any need to compare the price of an ebook to a paper book. If I want an ebook, and if D>P as nogle said earlier, then I buy it; if not, I don't. What the paper book costs just doesn't come into the equation.

Simple economics, basically.

Simple economics should also tell you that what influences your buying decisions is different than what influences other buying decisions. Most people have a bias for physical objects that they can hold and possess. Something that can be possessed with your hands is just more “real” than something digital.

And you may not care what a paper book costs, or what anything else costs for that matter, but the vast majority of people have some kind of sense of fairness; if the cost of producing something were somehow 50% less, people would expect to pay less for that something, because that would be “fair.” If factors such as “perceived fairness” didn't matter in people's buying decisions, corporations wouldn't need to have public relations departments.

Originally Posted by latepaul

Thank you. It's basic capitalism. You price your product at what the market will bear in order to maximise your profits.

Um, no, this is not “basic capitalism.” The term capitalism refers to private ownership of means of production; the term is at best an anachronism referring to a very limited number of historical cases, such as the preindustrial northern United States. It is more of an idealistic notion, since there has never been an economy where everything is privately owned and operated. What you might be thinking about is a “market economy,” but in a basic capitalistic market economy, there are no government interventions such as IP. So really, ebook prices reflect the basic workings of a mixed market economy rather than “basic capitalism.”

Supply and Demand analysis only applies when there are no government interventions and the market approximates perfect competition. Considering that copyright is a government intervention, basic supply and demand analysis is not really applicable here. A rent-seeking or welfare analysis would be more appropriate for any industry dependent on copyright.

Originally Posted by nogle

I would like to be driving a Cadillac, but I can only afford a Chevy. Production costs are similar, so pricing should be similar... It is the evil auto industry and their "price fixing" that keeps me from driving the vehicle I want.

Books are not perfectly substitutes, as the content (the intellectual property) matters. When you are buying an eBook, you are buying a license to the intellectual property only; there are no physical goods (the paper). It is the value of the intellectual property that drives the price of the book, not the physical good.
Same with cars, the value of the design, prestige, etc. of the Cadillac makes it more valuable than the Chevy, not the cost of the parts and assembly.

the comparison between cars and ebooks is a a little weak . It is not the superior quality of the Cadillac that makes it more expensive; it is more expensive by virtue of the desire of status-seekers to have a more expensive car. This reminds me of a movie, I think it was How To Lose a Guy in Ten Days, where the guy proposes a strategy of"affordable diamonds," to which the women retorts (paraphrasing); "you don't know women at all. Woman want diamonds because they are unaffordable..."

In other words, the reason that more expensive cars exist is because there are people who want more expensive cars so they can say their car is more expensive than your car. Or in other other words, conspicuous consumption.

A comparable example would be people buying books solely for the status they confer. This was true in the 1920s, when considerations such as the cover and smell often trumped the content of the book itself in the buying decision. But People don't display ebooks, thus they are not bought for status-seeking or conspicuous consumption. You can say that the price people are willing to pay is based on the IP content and not the production costs, but you should also consider that people are willing to put up with higher prices if they believe production costs necessitate those prices.

People are willing to pay more for popular books, but that represents more of a market failure than a market virtue; the reason people are willing to pay more for popular books is because there is a popular consensus (and being herd animals we tend to trust the judgment of crowds) that the book is good they can reasonably assume that the book is worth the cost. Books are an unusual kind of good because they are one of the few goods which you buy without knowing what value you are getting, which discourages broad consumption and encourages consumption of a few, trusted authors.