An Analysis of Pricing Models in the Electronic Book Market
In stock
SKU
38.4.04
Abstract
In this paper, we develop a game theoretic model to study the pricing of e-books and e-readers under two pricing models: wholesale and agency. We analyze pricing strategies for a publisher and a retailer. We identify the complementary relationship between e-books and e-readers as the main reason for the retailer to set a low e-book price in the wholesale model. Comparing the wholesale and the agency models, we find, in a wide range of market conditions, the price for e-book readers is lower in the agency model, leading to a higher e-book market share. However, a higher e-book price in the agency model lowers e-book consumption. Overall social welfare is lower in the agency model than in the wholesale model. While total consumer surplus is slightly higher in the agency model, largely because of a lower e-reader price, business profit is lower. The publisher, surprisingly, is worse off under the agency model.
5/13/14
Additional Details
Author | Lin Hao and Ming Fan |
Year | 2014 |
Volume | 38 |
Issue | 4 |
Keywords | Electronic book, e-reader, pricing, agency model, wholesale model |
Page Numbers | 1017-1032 |