Re: whether prices are excessive.

[David Farber <dave () farber net>]

________________________________________
From: Stephen Unger [unger () cs columbia edu]
Sent: Wednesday, July 09, 2008 12:19 PM
To: David Farber
Cc: ip
Subject: Re: [IP] whether prices are excessive.

My experience has been that textbook publishers appear to violate what
I always thought was a fundamental market rule that I remember from
high school and college economics courses. I learned (and it seems
sensible) that the optimal price for a product in a competitive market
is a little above the marginal cost. Once the publisher's share of
book sales has paid off the initial costs of production (editing,
etc.) the cost per additional book to the publisher is just the cost
of printing another copy and distributing it. I would expect that the
price would fall to some modest figure above these costs.

What I found, in the case of two  text books that I have authored, is
that the publisher, instead of reducing the price after paying off
fixed costs, has steadily increased it. Not surprisingly, demand fell,
partly because there was more incentive for students to buy and sell
used copies. My requests, as the author, to reverse this process were
ignored, and books that started out at well under $50 are now listed
at over $120. One of these books is on technology and society issues,
accessible to general readers. But obviously almost nobody is going to
pay $120 for a 353 page paperback book. Comparable sized books on the
same topic usually sell for under $35.

The attitude of the publisher is perhaps best revealed by the
following tale. My department consolidated our digital logic and
computer organization courses, which I had been teaching, into one
course. Since I did not want my students to have to buy two expensive
books, I presented the publisher of the digital logic book, which I
had written, with the following choice: either sell that book to my
students at half price, or I will post the required parts (about half
the book) on line so my students wouldn't have to buy it. There were
roughly 80 students in the class, and obviously the publisher would
make a substantial profit on each copy sold at the halved price (then
about $50). Guess what! They declined, thereby losing all the sales,
not only to that class, but to my classes in subsequent semesters.

Steve
............

Stephen H. Unger
Professor (retired)
Computer Science Department
Columbia University
............

On Tue, 8 Jul 2008, David Farber wrote:

> ________________________________________
> From: Mary Shaw [mary.shaw () gmail com]
> Sent: Monday, July 07, 2008 10:06 PM
> To: Sunil Garg; David Farber
> Subject: Re: [IP] The real meaning of the Act of 'Civil Disobedience'
>
> Not that I take Wikipedia as definitive, but in the university model the professor can usually choose the textbook 
> from among competing texts for the same course.
>
> The underlying question is whether prices are excessive.
>
> Here's a quick overview of where the price of a book goes. This is for regional guidebooks, which I understand pretty 
> well.  I don't know how closely it corresponds to textbooks, but it's probably a good first cut.
>
> Divide the retail price of a book into six roughly equal segments -- 15-20% per segment.
>      Two parts (40%) goes to the retailer for rent, salaries, stocking books, etc
>      One part (15%) goes to the wholesaler for warehousing, distribution, etc
>      One part goes to the publisher for editing, business risk (fronting the money), marketing
>      One part goes to the printer for putting ink on paper and binding the volume
>      One part goes to the author.
> For a $60 textbook, that's about $10/part.
>
> The retail markup seems to be in line with general retail practice. A low-visibility cost to the publisher is 
> fronting the money to edit and print a text that doesn't compete well in the market. A few years ago I paid my 
> printer $3-4/copy for 250-300 pages softbound, so $10-15 per copy for a large textbook doesn't seem out of line. For 
> textbooks, author royalties used to go 10-15%, higher as volume goes up, so that's about right. As I noted earlier, 
> it doesn't pay the author very much per hour.
>
> Note that the author does get a cut of the income.  This isn't like the music industry, where a common complaint is 
> that the performer isn't getting any of the income.
>
> So which of these parts is exorbitantly expensive?
>
> As for frequently-changing editions, it's gratuitous to suggest that they're changed solely to force students to buy 
> new books. Particularly in computer science, the material changes.  For some large freshman courses, 
> university-specific editions are sometimes printed to keep the size and cost of the book down by including only the 
> chapters required for the course.
>
> One way to get the cost of textbooks down would be to sidestep the retailer.  For example, a student could sign up at 
> course registration time to get the books automatically, and a distributor could make up individualized text packages 
> and ship them in bulk to a university dispensary. Given the lead time, it seems like this could take a third off the 
> top of the price.
>
> Another possibility to explore would be sets of monographs rather than monolithic textbooks.  That, however, has 
> integration problems of various kinds.
>
> Mary Shaw
>
>
> On Mon, Jul 7, 2008 at 8:47 PM, Sunil Garg <sunil () sunilgarg com<mailto:sunil () sunilgarg com>> wrote:
> According to Wikipedia, "Monopolies are thus characterized by a lack of economic competition for the good or service 
> that they provide and a lack of viable substitute goods."
>
> For the vast majority of courses,
>
> *   students are prescribed a particular textbook,
> *   that book is published by a single publisher, and
> *   frequently changing editions eliminate most of the pricing competition with used books
>
> ...thus characterizing a monopoly, even if a single company doesn't control the entire industry.
>
> -Sunil
>
>
> On Mon, Jul 7, 2008 at 5:24 PM, David Farber <dave () farber net<mailto:dave () farber net>> wrote:
>
> ________________________________________
> From: Mary Shaw [mary.shaw () gmail com<mailto:mary.shaw () gmail com>]
> Sent: Monday, July 07, 2008 7:42 PM
> To: David Farber
> Subject: Re: [IP] Chron of Higher Ed: Founder of Textbook-Download Site Says Offering Free Copyrighted Textbooks Is 
> Act of 'Civil Disobedience'
>
> The undergraduate who is running this site clearly needs to study the basis for civil disobedience more carefully.  
> First, civil disobedience is not committed anonymously, but publicly and with full expectation of suffering the 
> penalties.  Second, its purpose is to protest injustice, not prices.
>
> Also, though there has been concentration in the textbook industry over the last decade or so, I don't think it is 
> yet a monopoly.
>
> Mary
>
>
>
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