Reading Between the Lines of Used Book Sales

["Hamaker, Chuck" <cahamake@email.uncc.edu>]

Reading Between the Lines of Used Book Sales
By HAL R. VARIAN
Published: July 28, 2005
NYTIMES
http://www.nytimes.com/2005/07/28/technology/28scene.html?ei=5070
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THE Internet is a bargain hunter's paradise. Ebay is an easy example,
but there are many places for deals on used goods, including Amazon.com.

While Amazon is best known for selling new products, an estimated 23
percent of its sales are from used goods, many of them secondhand books.
Used bookstores have been around for centuries, but the Internet has
allowed such markets to become larger and more efficient. And that has
upset a number of publishers and authors.

... booksellers rarely mention the resale value of a new book.
Nevertheless, the value can be quite significant. 

Consider a recent paper, "Internet Exchanges for Used Books," by Anindya
Ghose of New York University and Michael D. Smith and Rahul Telang of
Carnegie-Mellon. (The text of the paper is available at
http://ssrn.com/abstract=584401

The starting point for their analysis is the double-edged impact of a used
book market on the market for new books. When used books are substituted
for new ones, the seller faces competition from the secondhand market,
reducing the price it can set for new books. But there's another effect:
the presence of a market for used books makes consumers more willing to
buy new books, because they can easily dispose of them later.
...

..textbook markets, where many books cost well over $100. Judith
Chevalier of the Yale School of Management and Austan Goolsbee at the
Chicago Business School recently examined this market and found that
college bookstores typically buy used books at 50 percent of cover price
and resell them at 75 percent of cover price. Hence the price to "rent"
a book for a semester is about $50 for a $100 book.
...

The study, "Are Durable Goods Consumers Forward Looking? Evidence from
College Textbooks," is available at Mr. Goolsbee's Web site,
gsbwww.uchicago.edu/fac/austan.goolsbee/website/.)

...

According to the researchers' calculations, Amazon earns, on average,
$5.29 for a new book and about $2.94 on a used book. If each used sale
displaced one new sale, this would be a less profitable proposition for
Amazon.

But Mr. Bezos is not foolish. Used books, the economists found, are not
strong substitutes for new books. An increase of 10 percent in new book
prices would raise used sales by less than 1 percent. In economics jargon,
the cross-price elasticity of demand is small.

One plausible explanation of this finding is that there are two distinct
types of buyers: some purchase only new books, while others are quite
happy to buy used books. As a result, the used market does not have a big
impact in terms of lost sales in the new market.


Chuck Hamaker
Associate University Librarian Collections and Technical Services
Atkins Library
University of North Carolina Charlotte
Charlotte, NC 28223
phone 704 687-2825