The market for college textbooks and related materials is in ferment. Innovations and new technologies bid to overturn long-standing positions of market power enjoyed by publishers, book distributors and bookstores. In particular, the advent of enhanced shopping capabilities on the Internet has made it possible for students to discover many alternative ways to acquire needed textbooks. Now, students are able to weigh the price of those alternatives against other factors such as their learning styles, the quality of the item, their ownership of the item after the term ends and whether they will be able to resell it.
It seems likely that these new student shopping capabilities will increase the price sensitivity (“price elasticity”) of students, which historically has been quite low. The demand side of the textbook market looks very much like the market for pharmaceuticals, where demand is highly inelastic. The individuals (professors and physicians) who tell consumers what items they should purchase aren’t the people (students and patients) who actually pay for the items. Further, evidence reveals that most professors and physicians don’t know as much as they should about the prices of the items they are prescribing.