Book Publishers Often Use Price Discrimination Across Time to Increase

question 117

Essay

Book publishers often use price discrimination across time to increase profits.Toni Morrison's book, A Mercy, was published as a hardcover edition in November 2008 at a price of $23.95.In August 2009, the paperback version was published at a price of $15.00.Assume that 100,000 hardcover books were sold to hard-core Toni Morrison fans in November 2008, and 400,000 paperback books were sold to casual readers in August 2009.Illustrate each of these situations graphically.Assume that the marginal cost of the hardcover version is $2.00 and the marginal cost of the paperback version is $0.75.

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Definitions:

Compensation

The complete sum of financial and non-financial compensation given to a worker by their employer in exchange for the work carried out as needed.

Marginal Seller

A seller who is indifferent about selling at the current market price and might leave the market if prices decrease.

Cost

Cost is the amount of money required to purchase, produce, or maintain something, encompassing both direct expenses and indirect expenditures.

Transaction Costs

Expenses incurred in buying or selling a good or service, including search and information costs, bargaining costs, and enforcement costs of policies.