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June 5, 2006
Demand for new textbooks is inelastic
Thus reports the New York Times:
Last year, the number of new college textbooks sold by American publishers dropped for the second year in a row. But the revenue brought in by such books rose for at least the fifth consecutive year, sustained by continuing price increases.
Increase in price and a resulting increase in revenue = inelastic demand.
The article goes on to state that publishers are raising their prices to compensate for the lost revenues due to the increasing popularity of used books as well as the higher costs of "paper, binding and utilities". No mention of marketing costs.
There is no doubt that textbook prices are rising more quickly than inflation. When I was in college in the early '90s, an intermediate macro text sold for around $50 (I still have the price tag on it). Today, a similar text sells for over $130. The CPI meanwhile has increased from around 125 to about 200.
In some sense you get more from college textbooks today. Most have a website, CD, or both. I've always felt that the CDs were designed to get you to buy the new book (with CD included) or shell out extra money for the CD separately. A website has the same issue. A password is typically included with a new book, but used book purchasers can buy a password separately. In my early days of teaching (as a TA in grad school) when CD supplements were relatively new, I was terribly unimpressed. I think they are better now, but my initial experience has kept me from being overly enthusiastic. I will grant that some types of learners can benefit from the types of review exercises on textbook CD supplements. But aside from these extras, the overall quality hasn't changed much. There are good books and better books, just as there have always been.
I predict that textbook prices will continue to outpace inflation. There are alternatives to the traditional textbooks. Preston McAfee and Roger McCain are two notable examples of freely available on-line texts in economic principles. The change is slow in coming, but it is happening. But there is another side to this development. There will, I think, always be a substantial market for traditional texts. As some professors leave the market for freely available texts, that leaves a more inelastic demand curve facing the publishers. The effect on the revenues of the publishers will necessarily depend on how many customers leave the market and how much they are able to recoup with price increases. But if, as I suspect, those professors most likely to use the free texts are those who are most price sensitive (on their students' behalf), we should see textbook prices continue to rise.
Yes, even in the early '90s when textbooks were a relative bargain, we still complained--probably just as much as students today. There are market realities at work here, and as with gasoline, one can only grin and bear it. However, I would offer a little perspective for students. When you sell back your used books, you generally get back a percentage of the used book sale price. Think of it as a semester-long lease with a security deposit. The average used book only costs you a couple dollars per week if you think of it that way. If you're already paying $20,000 per year for tuition, you'll hardly notice it. (Aside: Concern about textbook prices seems more of an issue at state universities where tuition is lower and books are more costly relative to tuition.)
This group would take my leasing analogy and formalize it with an actual rental program. This might make some sense in the age of the internet. Before Amazon.com, I would not want to force students to rent rather than buy. But since students can easily buy books on the internet if they are majoring in the subject and want to keep the book beyond the end of the semester, this may be a sensible way to reduce costs as well as inefficiencies.
Posted by William Polley at June 5, 2006 2:49 PM
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Comments
William,
Good post. And your right about the renting, there is even a site out their that allows students to rent textbooks and a host of alternatives to retail pricing bookstore buyback returns, even beyond Amazon's used book marketplace -- although this is the most consistently reliable source.
I actually developed a site dedicated to fostering discussion on this issue and posting some information that might be useful to students.
TextbookPOWER.com
I'm going to link to your blog in the site's forum and cite you, if that's okay.
Posted by: R. Kennedy at June 7, 2006 9:06 PM