Beyond the Dogma of the Fixed Book Price Agreement

Abstract

After describing the essential features of the book market, a welfare analysisof the fixed book price agreement is given. Allowance is made for theopportunity cost of reading. Theoretically such an agreement pushes up bookprices and depresses book sales. However, more titles will be published,particularly books with low price elasticity and those that take a long timeto read. Potential advantages of better service, distribution and retailnetworks seem less relevant. The book market is one of imperfect competition,but even so the cross-subsidy argument is unlikely to be valid. A qualitativeanalysis of the Dutch situation is given. Tentative conclusions are that oneshould be more concerned about the number of well-stocked bookshops than thediversity of published titles and that debutantes do not face big barriers toentry. One should be even more concerned about the falling proportion ofpeople reading books. Governments fail to set (quantitative) objectives forthe fixed book price agreement, which makes it difficult to evaluate itssuccess and contributes to it being treated as dogma in the book world and thepolitical arena.