More on Book Pricing By Amazon

Since I started to read a number of books on the Amazon Kindle, I developed a keenness to understand the price differentials between the various editions of the same book. I have come to a few preliminary conclusions together with a few things that are puzzling.

My first realization is that the Amazon bookstore clearly posts different prices for the digital and paper versions of a book differently but also that the digital versions are not necessarily the cheaper version as I had casually assumed. This assumption was mainly informed by the subtle marketing statements that digital books once produced can be reproduced at little extra cost. Therefore, the marginal costs are much closer to zero than that of a hard cover or soft back book.

The second lesson that I learned is that even for the electronic versions of the same books, the Amazon website does post different prices dependent on one's IP address or purchasing history. As stated on this blog post, this implies is that two readers will buy the same title on the same date and time and pay different prices dependent on what part of the world they are making the purchase. Careful timing may offer an opportunity for arbitrage but I am certain that the algorithm soon catches up with this too.

Thirdly, sometimes the price for one version of a book such as this may cause exhibit a price spread of upwards of US$ 5 between the paperback and Kindle versions of the book. In my view, it appears that that this steep differential is temporary and has been occasioned by extra stocks of the physical copies. It is therefore prudent to offer a steep discount to clear this inventory and save space.  The electronic version does not have this character of occupying physical space and so is not subject to steep discount at this time.

Finally, my hypothesis is that with the distributional efficiency that comes from technology, e-book prices will be less prone to price fluctuations changes than other books are. And the way to test this is to take a sample of 2000 titles and create a price index of them over a long period of time. wWelcome to the fascinating economics of books.