Demand for university textbooks is generally inelastic. How do I know? I am a student. There is no substitute for the content in textbooks that are required for some university courses. That partly explains why university textbooks can be priced so high. Also, research has shown that “The publishing industry is dominated by five companies that dominate upwards of 85 percent of the market.” This is an example of oligopolistic competition. The publishing industry colludes in keeping the price of textbooks high in order to maximize profits (profit orientation). However, there are different kinds of substitutes emerging.

Many textbooks now come in bundles that include CD’s, study guides, and other content. Bundling saves costs for the company as well as the customer. This could be considered consumer oriented pricing as it maximizes the value for the consumer. However, there is another substitution for textbooks that further maximizes value for consumers- eBooks. Through purchasing eBooks, consumers get the same content of textbooks but at a much more affordable price. Ebooks are imperfect substitutes since some consumers prefer having a hard copy to highlight. However, the same core benefits of a regular textbook are still provided.

Currently, eBooks are still in the infancy stage. Demand for eBooks may not be high since it can be considered an innovation. Physical books have been around for centuries, so the idea of an electronic book may need some time for consumers to get used to. But as more and more people realize the convenience of eBooks, more and more people will adopt this program. Especially in this technology savvy generation, hardcopy textbooks may become obsolete in the future.

Links:

http://www.nbcnews.com/business/required-reading-textbook-prices-soar-students-try-cope-8C11140099