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Book Wars

When firms get involved in price wars it is usually to the disadvantage of the companies concerned – unless they can force rivals out of the market – and to the advantage of consumers who enjoy lower prices. Or can it be more complicated than that?

 

Recently in the United States, Wal-Mart got involved in a price war on books with Amazon and other distributors. Wal-Mart started by reducing the price of ten best-selling books to $10. Amazon responded and eventually Wal-Mart reduced prices to $8.98, which would normally be below cost, given the wholesale price of books.

The book publishers and other booksellers responded by claiming that such unfounded discounts would undermine the publishing industry.

 

But why was Wal-Mart prepared to offer a limited range of books as a loss-leader, if in fact that was what it was?

 

To see an analysis of the implications of the “book wars” have a look at the article “Priced to go” by James Surowiecki which was published in The New Yorker last week and can be accessed by clicking here.

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