It's back to school time, which has had me thinking of a puzzle to which I just don't know the answer. In hopes of help, I emailed my blog-friend Mike Fladdigan of "Mikeroeconomics":
"Mike, Hope all is well. I have been wondering about something that i was hoping you could do a post on, or maybe point me to a good paper about.... I don't understand why the price differential is so massive between so many bookstore texts and (those very same) texts that can be bought online on amazon.com or half.com or ebay.com, etc. For example, a coworker of mine saw that her micro econ text bundle (including study guide etc) would have cost $140 if she had bought it at the bookstore. She found the exact same thing (slightly used) for well under $40. New books were also quite affordable. Assuming that students don't really care about the condition of their texts (which I think is a reasonable assumption), the only thing I can think of why the market hasn't tended to draw this gap closer is issues of assymetric information or misunderstanding about the non-pecuniary transaction 'costs' involved with text purchasing online....."
He responded thusly:
"I have concluded that students buy textbooks from the campus store because of1) asymmetrical info 2) they ignore opportunity costs 3) the value the book more now and heavily discount the future 4) instructors change the elasticity of demand by "demanding" that students start reading now 5) students have different values for money at different times depending upon how they "earned" the money 6) think that they can resell the book and actually rent the book at the same price as amazon.com price 7) want to build a professional library and paying so much for a book will make them value the book more...."
The more I think about it, I wonder how much a professor's propensity to bundle his/her text with supplemental items that maybe can not be found easily online is to blame for why still so many students buy their text at the college bookstore - and thus for why the price differential stays so large. But I don't think that is everything.