From time to time, I try to think like an economist. (Now that I’ve given up trying to walk like an Egyptian.) Yesterday, in a used book store I asked myself this question: why is the same book more expensive when new, and less expensive when used?
If a used book is in good shape, it’s utility is indistinquishable from that of the new version. Furthermore, it is now much harder to get. In fact, there may be just a handful copies of the title still extant. Furtherfurthermore, the world has had a chance to vote on the book and declare it, in some cases, a “classic.” The used book can be, in this way, more, or more obviously valuable, than the unknown commodity it was on first publication.
In short, supply has gone down. Demand has gone up. But used books are less expensive. Plainly, I am not thinking like an economist because an economist would know how to think about this…and I clearly don’t.
I am guessing that this must have something to do with inefficiences of the marketplace. The people who own and run used book stores are generally more interested in reading books than selling them. No, they don’t have a cash register, just a book of blank receipts from Woolworth’s. This is always hard to find in the chaos of litter on the front desk and more often than not, it is never found because it happens to be sitting under the bookstore cat.
So, ok, book stores are not technologically or commercially sophisticated. Plus, they have the problem of having to assess the value of products that exist in great, unmanagable profusion. Some day every book will have a RDIF tag that will allow the book to “phone home” to a market place that exists on line. The local merchant will know how many copies are extant (supply), what the state of demand is, and his/her price will reflect a true marketplace.
Right? But I think used books will still be cheaper than new ones…despite the fact that they are “just as good,” more scarce, and their value to the reader is more clear. I am guessing that this is because there is something like a newness premium. This is the one that can be calculated very precisely by what happens to the value of a car the moment its first owner “puts his foot on the acceleration.”
How do economists explain the newness premium? (If that’s what’s going on here.)