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About this weblog
Here we'll explore the nexus of legal rulings, Capitol Hill policy-making, technical standards development, and technological innovation that creates -- and will recreate -- the networked world as we know it. Among the topics we'll touch on: intellectual property conflicts, technical architecture and innovation, the evolution of copyright, private vs. public interests in Net policy-making, lobbying and the law, and more.

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In the Pipeline: Don't miss Derek Lowe's excellent commentary on drug discovery and the pharma industry in general at In the Pipeline

Copyfight

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July 28, 2005

Behavior is Always More Complex

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Posted by Alan Wexelblat

...than simple cause-and-effect would lead you to think. Yesterday I noted that there seems to be evidence that music-sharers are also heavy music buyers, contrary to what the RIAA/BPI would have us believe. Today, the NYTimes carries a piece by UC Berkeley's Hal Varian discussing a study of used-book sales' effects on new book sales.

The study, by Anindya Ghose of NYU and Michael D. Smith & Rahul Telang of CMU, looks at the impact of the used-book market on the new-book market, particularly online. This subject has been of concern to organizations such as the Authors Guild and the Association of American Publishers, which sent a letter to Amazon a couple years back bemoaning its promotion of used options along with new sales.

In their study (online text available from ssrn.com), Ghose et al conclude that the secondary market actually drives new sales, in part because it helps buyers be more confident they can dispose of unwanted books they bought new. This supports a study by Judith Chevalier of Yale School of Management and Austan Goolsbee of the Chicago Business School. These two looked at college textbooks (which are quite expensive to purchase new, compared to mass-market hardcovers) and found that students were, in effect, paying a price to "rent" a textbook for a semester. Paying full cover price for new was deemed more acceptable on the understanding that a percentage of that price could be gotten back by selling the book back at reduced price to the bookstore or to another person.

The bottom line is that consumers and their behaviors are complex and need to be studied wholistically. Just as a used-book sale doesn't one-for-one take away a new-book sale, we should understand that the availability of free downloadable digital media doesn't take away one-for-one from new purchases (whether it's CD sales, movie ticket, DVD sales, whatever). By coming to a better understanding of consumers' motivations and assumptions we can design business models that are more likely to succeed.

Comments (3) + TrackBacks (0) | Category: IP Markets and Monopolies


COMMENTS

1. Ron Coleman on July 28, 2005 7:47 PM writes...

The bottom line is that consumers and their behaviors are complex and need to be studied wholistically. Or at least thoroughly. After all, we wouldn't want to fall victim to a fallacy by asserting that becasue there seems to be evidence that music-sharers are also heavy music buyers this means less (unauthorized or, if you will permit me, unlawful) music sharing would necessarily mean less music buying... when precisely the opposite possibility is every bit as plausible and consistent with that correlation!

I'm just saying.

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2. Kay on July 29, 2005 9:16 AM writes...

Textbook publishers say the reason textbooks are so expensive is because they know their profit from them is going to be so limited because of resales..... that's also why they do new editions so often, to thwart the ability of students to resell them year after year...

Just saying, while consumer behavior is more complex than you'd think, the manufacturer's isn't!

Permalink to Comment

3. Ron Coleman on July 29, 2005 5:40 PM writes...

That's very demand-side of you, Kay!

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