Retail Consolidation And The Price Elasticity Of Demand For Books

Abstract

This paper estimates a translogarithmic utility function to derive price elasticities of demand for nine categories of books published for the period 1975 to 1996.  In general, more popular categories of books, such as adult fiction and non-fiction hardcover and paperbound publications, tended on average to have higher price elasticities of demand, suggesting lower retail margins than more specialized categories, such as professional books and mail order specialty items.  This study also briefly examines increased consolidation and concentration in the retail book industry.  While increases in oligopsony power suggests larger publisher to retailer discounts, price elasticity estimates indicate that retail margins were generally virtually unaffected during the period considered.  One possible explanation is that increases in retailer profits were at the expense of publishers, which augur further concentration in the retail book industry.