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Originally Posted by coleman
Nothing, but the cost of production of potatoes has EVERYTHING to do with the price of potato chips in Peoria. Just like the cost of production has everything to do with the cost of product.
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No, actually. In this case it doesn't. If consumers just bought books to use as bricks, and really didn't care about who the author was, or what the subject matter was, or whether it was written above a third grade level, then yes. I would agree. One book would be as good as another.
But they don't.
To continue the potato chip example: If you want Joe's CrispyFat Gutbusters, you'll pay Joe's price or you won't get them. It really doesn't matter what happens to potato production. You might choose to change
brands, but that's your only recourse. No one else produces Joe's CrispyFat Gutbusters. Period.
Quote:
Originally Posted by coleman
The problem here is that the producer is not passing on cost savings to the consumer due to lack of competition in the market space. That doesn't change the fact the cost of production is significantly reduced.
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You are correct. In fact, that's precisely what I said in the post with which you're disagreeing. The end result is that there is little market incentive to lower prices when production costs drop.
Quote:
Originally Posted by coleman
Also, your example is flawed because the model is not identical because it's not a physical good.
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The tangibility of the product has no impact on this particular economic mechanism. Each title, under a standard contract, is a little monopoly. Under monopolies, the indirect linkage between production cost and price is nearly severed, because the price is no longer subject to competitive market pressure.
The good news is that authors are getting smart, and are less likely to give away long-term e-rights for no compensation (those that have any kind of clout, that is).
The bad news is that publishers are actually having to pay
more to secure e-rights for big name authors. That actually results in upward pressure on e-book prices.