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Why does John Nye violate the law of one price?
John's new book War, Wine, and Taxes sells new for $29.95 on Amazon [TC: this is correcting a previous mistake in listing the price], with free shipping in the U.S. Many of the used copies of John's book are selling for over $30, others in the $25-30 range, and the shipping charges are higher than Amazon's. Last I looked, none of the forty used copies were selling for less than $25 and one was selling for $50.
It is not hard to get a new copy of John's book, John assures me. What's up?
Posted by Tyler Cowen on November 28, 2007 at 07:24 AM in Books | Permalink
Comments
I recently looked into buying Amazon gift certificates on eBay. I thought perhaps I could get some at a modest discount to face value. It turns out that most of them were actually selling at a small premium (say $0.50 above face for $10-$25 certificates). In most cases, the certificate was a code that would be sent by email, so we're not talking about a tangible gift card that you could put in someone's Christmas stocking.
I don't get it.
Posted by: mph at Nov 28, 2007 7:48:30 AM
Well, I guess markets work. Amazon has raised the price to $29.95.
Posted by: Mario Rizzo at Nov 28, 2007 7:56:06 AM
This is the 2nd time in the last 24 hours I've followed a link over to Amazon and found a higher price than stated at the link that sent me. I'm seeing 29.95 with free shipping for this book. Last night I followed an AICN link to the Monty Python complete set that was supposedly 44.xx, but was actually 58.99. Is this a coincidence, or are they practicing price discrimination again?
As for the small vendors charging more, I have seen this several times. I think they often have one or two copies and set a high price figuring someone may buy when Amazon is out of stock. The craziest fluctuations I've seen are with textbooks. I considered buying Mankiw's principles book back in August for a little autodidacticism. As I recall, all copies, used or new were over 100.00. Right now they range from 4 bucks up to 250.00. I bet the 250.00 may eventually sell (around the 2nd week of the next college semester). I myself am opting for the 4 dollar previous edition (and will probably use some of that other 246.00 to pick up the Encyclopedia.)
Posted by: different jeff at Nov 28, 2007 8:04:56 AM
I guess the previous readers wrote some pretty valuable comments in the margin!
Posted by: at Nov 28, 2007 8:37:22 AM
It's still early for me, but I thought a large online vendor (not sure which one) had been found to offer different prices to different visitors. It might have been based on your purchase history, or your path through their site.
This is certainly technically possible. Web pages are starting to adapt more and more to who you are and how you got there (typing in "www.foo.com" in your browser, or searching for "cheap foo" on google).
Posted by: odograph at Nov 28, 2007 9:11:50 AM
"I guess the previous readers wrote some pretty valuable comments in the margin!"
'Comments in the Margin' would be a great name for a book of comments drawn from this blog.
Unrelated, I know.
Posted by: Ross Parker at Nov 28, 2007 9:45:46 AM
I buy my textbooks from half.com. New always cost less than lightly used, which always cost less than used. I have wondered about this for awhile. Naturally, I always buy the cheap new books. Does this mean I will be able to sell them for more after I use them?
Posted by: Aaron Fix at Nov 28, 2007 9:46:21 AM
Myabe it's because some people who are trying to sell used copies sell them for lower than the new price, and some try to sell them for higher than the new price, so the only used copies left are those with the high prices?
Posted by: Hei Lun Chan at Nov 28, 2007 9:53:24 AM
I think this happens a lot -- store A sells the same product as discount store B, but for 50% more. Or, store A has a "regular" price, but the item goes on a similar sale on a regular basis. If you need the item, you just check the paper every week until it (predictably) comes up at the "real" price. I expect that nobody -- or nearly nobody -- buys in the non-sale weeks.
I used to collect baseball cards. In the magazines, or even at card shows, you find different dealers offering the same (bestselling) product at different prices. You'd think at the shows, the higher-priced tables would lower prices to match the higher-priced tables, but they don't -- although it's easy to negotiate them down.
I'm not an economist, but doesn't the "Law of One Price" refer to the price of actual transactions, rather than the price that various sellers offer?
Posted by: Phil at Nov 28, 2007 9:58:48 AM
This is not a violation of the law of one price. You are confusing
"selling" with "listing". Listing is free, you can post whatever you
think some idiot will pay one of these days. That doesn't mean there
are any transactions at that price.
Posted by: Mark at Nov 28, 2007 10:21:39 AM
I noticed the same thing when my novel went up on amazon (the perfect gift for Christmas!) Within a day or two, there were three or four alternate versions up from other suppliers, all at or higher than the Amazon price. My guess is that these guys put these books up for sale on as many items as possible, with the expectation that from time to time Amazon may go out-of-stock and then they will pick up the interim business. This seems like it is just crumbs, but such crumbs from a entity the size of Amazon may be large enough for a smaller vendor to live on. I know of restaurants that seem to survive solely on the overflow from a popular restaurant next door. "The wait is HOW long for a table? Let's go next door."
Posted by: coyote at Nov 28, 2007 10:46:43 AM
All I can say is that Professor Nye was one of the finest economic minds I had the pleasure of studying with at Washington University. Go buy his book.
ko
Posted by: kemper at Nov 28, 2007 11:00:10 AM
My guesses:
a) Figuring out how to price a used book is hard---some books go up in value when out of print, some go down. Vendors take guesses and make mistakes, resulting in fluctuations in both directions. You're looking at one of those fluctuations. This is more apparent at a site like abebooks.com, whose listings [I]all[/I] come from smallish local bookstores.
b) Used book sellers don't necessarily know what Amazon's current free-shipping policy is, or don't update their prices for the changing promotions and whatnot that affect Amazon shipping.
c) What Mark said at 10:21.
d) Consumers don't rationally add up shipping charges; some people will blindly click on the first item in the sorted-by-price list and forget that they could have saved on shipping. Or, some consumers may click on the $25 book, then say "I wonder if I want anything else from this seller, so I can aggregate and save on shipping?" Some sellers may be deliberately taking advantage of this.
Posted by: Ben M at Nov 28, 2007 11:36:08 AM
I suspect that part of the problem is simply habitual behavior. Many people (like me) don't like to pay full price for books. They're AWFULLY expensive. So we go immediately to used-book sites whenever we want to see what a book will cost. Checking Amazon is often an afterthought. And I suspect that used-book outlets don't see their competition as Amazon but other used-book stores. As a result, bookstores set prices and people make purchases based on incomplete information. At least I know that I have bought used copies of books several times when new copies were available at a lower price. Markets, like anything else based on human behavior, are fallible. Now perhaps we need a government program to address this aspect of market failure.
Posted by: English Professor at Nov 28, 2007 12:18:57 PM
There are also a number of vendors who basically float their marketplace price up and down depending on what the current highest price is.
Of course, if several people do this then only one of them has to put in the wrong value to end up with odd results.
Posted by: Chris Stiles at Nov 28, 2007 12:25:56 PM
The explanation is that all those people trying to buy used
copies of his book have been testing his theories about wine
versus beer too much, :-).
Posted by: Barkley Rosser at Nov 28, 2007 1:09:52 PM
I think different jeff hit this on the head. Third party and used vendors set their prices higher than new on the expectation that new will be occasionally but unpredictably unavailable. Take Nintendo Wii as a case in point. It is unavailable 99% of the time on Amazon, so the speculators do well most of the time. Some speculators may think that Nye's book won't always be in stock at Amazon, and stake their price points now. That may actually be how the "law of one price" manifests itself here.
Posted by: Brad Hutchings at Nov 28, 2007 1:19:33 PM
I guess the previous readers wrote some pretty valuable comments in the margin
Yes, perhaps Andrew Wiles was the previous owner.
Posted by: anonymous at Nov 28, 2007 2:05:34 PM
The explanation is that super-saver shipping by Amazon is a rip off. Super saver shipping items arrive much later, always damaged, sometimes mispacked. Regular shipping is faster, better, and reliable. Third party vendor shipping is generally somewhere between super-saver and regular Amazon. So basically consumers are getting what they pay for in shipping, meaning the prices for the item itself should converge, as it has.
Posted by: Nathan Whitehead at Nov 28, 2007 2:12:42 PM
Are they actually selling at higher prices, or being offered at higher prices?
BTW, FWIW, I use Super saver shipping almost exclusively, and have never had a quality problem
Posted by: Scott Wood at Nov 28, 2007 2:37:07 PM
With several years experience selling books on my half.com account, and one year experience working a used bookstore, there are a number of possible explanations. It could be that some of the copies were resold review copies, listed before the release date. When they were listed, there were no non-review copies to compete, and so the seller (who may process a large number of books), listed the book at a comparatively high price. They didn't sell, but the cost of maintaining a current price list on an inventory of 100,000 books (not at all uncommon) is very high, so the prices haven't changed yet.
It could also be that these sellers are depending on mistakes of amazon customers. I know that I made several hundred dollars off of arbitrage between people who preordered a book on amazon at a high price, while there were cheaper copies listed on bookfinder.com (the best way to find *the* cheapest price for books on the internet). Of course that ended when amazon stopped listing that a book had been preordered on its main page, making preorders no longer available on Google. (Why did they do that? Doesn't this reduce their commissions?) I also made a fair amount of money by preordering difficult-to-find books at insanely low prices, and then reselling them once someone took my offer. (Both were very time consuming, and certainly not worth my time now with the amount of money I make from my job).
In all, I think the used book market is very efficient, though individual sellers can be highly idiosyncratic about their selling strategy. The used bookstore where I worked wouldn't sell a book at below cost (usually 1/4 the listed price in this case), even when it had owned the book for 5+ years. My personal strategy is to check my prices once a month, changing them to the lowest price as long as it is above my marginal cost to ship the book.
Posted by: Lucas at Nov 28, 2007 3:57:34 PM
I saw the same thing the last couple of days; looking at video games, though.
I think part of it is that the used sellers are hoping to lure unwary buyers who overlook the shipping cost.
Posted by: Bob Montgomery at Nov 28, 2007 5:57:37 PM
"c) What Mark said at 10:21."
Jesus looked at him and loved him. "One thing you lack," he said. "Go, sell everything you have and give to the poor, and you will have treasure in heaven. Then come, follow me."
You know, that almost fits...
Posted by: mph at Nov 28, 2007 6:09:18 PM
"The explanation is that super-saver shipping by Amazon is a rip off. Super saver shipping items arrive much later, always damaged, sometimes mispacked."
That has been the opposite of my experience. Super saver shipping has benefited me greatly.
Posted by: RJ at Nov 28, 2007 10:57:58 PM
As to the gift certificate comment earlier, it is essentially a form of money laundering. people buy them with stolen credit cards where they don't care what the price is. It's much easier to buy a bunch of gift certificates at one time before the card is reported stolen than it is to use a stolen credit card for any length of time. I don't mean to say that all or even most transactions are fraudulent, but a large number of them are.
Posted by: BK at Nov 28, 2007 11:56:55 PM
