Don’t Judge a Book by its Cover: Is Amazon the Enemy?

Book publishers and authors have been upset of late over Amazon’s seemingly resistant efforts to make fair contracts for print and digital books. Authors United is even seeking an investigation into whether Amazon is violating anti-trust laws.

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Economist Paul Krugman has sided with the authors and publishers, stating “Amazon has too much [market] power” and that the way Amazon uses this power “hurts America.” He sees Amazon as a monopsonist (dictates terms to its suppliers). I partly disagree with Krugman; while Amazon does have a significant majority of the market share for e-books, there are several other large retailers consumers can buy from (e.g. Barnes and Noble, Books-a-Million) and can additionally borrow books from local libraries. Furthermore, Amazon reached a deal with book publisher Simon & Schuster. Both firms were happy over the agreement, which suggests that Amazon is not dictating contract terms to its suppliers. Under the agreement authors publishing through S&S will have the same share of income as before, and additionally Amazon will promote S&S books on their website. Nonetheless, the ugly face of Amazon is being shown by its handling of contract negotiations with publishing firm Hachette. Since a contract between the two companies has not been renewed, Amazon has lessened discounts on books published by Hachette and is no longer allowing customers to pre-order Hachette books. Amazon’s tactics may be unethical that does not mean their market power is illegal. simon_schuster While publishers and authors remain upset with Amazon, consumers should rejoice over the company’s presence in the market. Consumer surplus has increased as Amazon’s e-book prices are as much as 90% off of paper books. And, if readers prefer a hard-copy book instead of an electronic version, Amazon also provides competitive prices.

One thought on “Don’t Judge a Book by its Cover: Is Amazon the Enemy?

  1. Monopsony is the flip side of monopoly: you’re the sole purchaser. That lets you hold down the price you pay, because you see the rising supply curve and look at marginal cost, not total cost. Now that negotiations foundered isn’t proof, but it sure shounds like that’s what’s going on.

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