David M. Brown's Blog

February 16, 2012

Ebooks are not overpriced if you are buying them at their price

Filed under: Economics,Philosophy,Publishing,Society and culture — davidmbrowndotcom @ 5:23 am

Animating some of the commenters in this Amazon discussion is a certain medieval “just price” notion according to which certain books, and in particular ebooks as a category, are supposedly “overpriced.” (I assume that this complaint exempts the hundreds of thousands of books we can obtain for 99 cents each or for 0 cents each.)

If Amazon were to charge $1,000 for an ordinary paperback that would typically sell for $7.95, it is unlikely that Amazon could move a single copy. But this $1,000 paperback would not be overpriced with respect to some Platonic abstract principle of The One True Price to which a disgruntled reader might appeal as he flings accusations of “greed and price-fixing.” It is, rather, overpriced with respect to what can be sold and earn a profit in the marketplace.

If I own a rare first-edition copy of a paperback in pristine condition, and I know I can sell it on eBay for $1,000, should I sell it for $7.95 (or perhaps $2.95) for the sake of protecting myself from JoCr’s accusations of “greed and price fixing”? If I seek a profit by participating in the marketplace, my profit-seeking is per se “greedy,” i.e., self-interested. But as philosopher and commentator Tibor Machan has often noted, the buyer is “greedy” too; he wants the most bang for his buck, just as I want the most buck for my bang. The buyer makes the trade because he values what I’m selling more than what he gives me in exchange for that good. If he knows that he can get a better deal in terms of price and convenience, though, he’s apt to take that better deal.

As a seller, I can “set” any price I wish for my wares (at least if Uncle Sam doesn’t intrude with orders to desist from alleged “price fixing”). But I must take into account how market conditions, including the valuations of buyers, determine the range of prices I can charge if I am to both sell my product and earn a profit. To overprice my product means to sell it at a price that too few customers will pay or that none at all will pay. That’s an error, of course; but it’s not in itself reprehensible. Similarly, I would not call a customer maleficently greedy for missing out on a good deal because he erroneously thought a better deal was just down the road.

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