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Bookshop, Blockbusters And Readers' Tastes: A New Appraisal Of The Fixed Book Price

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Executive Summary

This paper models the book retail market as a dual market. Consumers choose between competitively retailed, well-identified blockbusters and going to a monopoly bookshop to find the best match for their tastes. The author shows that uncertainty about the status on a given title (will it be a blockbuster or not?) places publishers in front of a trade-off between low prices (valuable if they get a blockbuster) and high prices (in the other case). The main effect of this trade-off is that the presence of blockbusters almost never lead to bookshop foreclosure by blockbusters and that a higher number of blockbusters leads to lower price for all books and increased consumer surplus.

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