The Orange View (on hiatus) Because Apple is great but it isn't perfect


Where ebook prices are heading

Seth Godin consults his Economics 101 crystal ball to see where ebook prices are really headed. He is assuming rational behavior by publishers to maximize revenue -- I'm not sure that's a certainty.

In a market where the marginal cost is close to zero, prices tend to race to zero as well. Except…

Except when there are no substitutes. If you want Elvis Costello to call you on the phone and wish you a happy birthday, he can charge you whatever he wants, because even though it costs him very little, you have no alternatives. If you want Elvis, well, there’s only one. Take it or leave it.

So our analysis begins with the notion that there will be at least two price points for ebooks.

-Domino Project blog, December 20, 2011

Posted by Aaron Pressman

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