I'm not one of the (clearly many) people who automatically believes e-books should cost less than paperbacks. E-books are more useful to me than paper books, not less. Pricing and cost are unrelated except for sorghum and gypsum.
This has a basis in the fact that high-cost goods do require high prices in order to have margins and that competition does push margins closer to costs. But, most people learn about these effects in the checkout line rather than econ classes. From those experiences, the explanation a lot of people have come up with is "If its cheaper to make, charging as much or more for it is mean."
He tells an entertaining story about running an experiment in some of his classes: he asks one group of classes how much they would pay to hear him read poetry and asks another how much they would pay to not hear him read poetry. Ariely notes that reading poetry is probably, how shall we say, not among his greatest strengths. The classes primed to pay pay; the ones primed not to, don't.
His experiments do, BTW, get more sophisticated than that, but I'm not at home right now.
People have "anchor" prices for books based on hardcover and softcover. Many don't realize that physical printing and distribution costs something like 10 – 15% of a book, and eBooks are not 0% by comparison. So you get lots of stuff like the OP.
Yes, that's why the ebook is $14 and the paper version is $16. Expecting ebooks to be radically cheaper is where people are going wrong.
There are e-books worth $100. Harris' _Trading and Exchanges_ is a great example (although it's stupidly priced at roughly half that). It is clearly worth more in Kindle format than it is in giant-ass hardcover format. And yet it costs them $0 marginal dollars to make a new copy.
http://www.amazon.com/2SO4-family-K3BiCl6-KH3F4-ebook/dp/B00...
Obviously paper books have their benefits. But some books are far better suited to be digital.
I'm thinking of the situation when you would buy something like this. I'm guessing most individuals would not buy one, and any corporation or other institution would have some kind of purchasing policy that would affect a purchase of this size.
An institution would probably not want a non-shareable Kindle copy - rather than buy each individual a Kindle copy, they would buy the hardcopy and stick it on the shelf.
Institutions that I am familiar with, anyway.
http://www.amazon.com/review/R1WUN3F61QZD5Y/ref=cm_cr_dp_per...
What is the "value" you're talking about here? Certainly not fair market value, when DRM and device lock-in leave little semblance of a free market. Or maybe you mean utility to the purchaser, but that varies wildly.
Your last sentence is an instance of price points. Yes, price points are part of what goes into perceived value. If you want to break out of a price point, you have many opportunities to change packaging, promotion, or pricing models to do that.
Clearly, for example, textbooks don't honor book store price points. Neither do magazines or serialized books. Neither do standards documents or technical books (as graphically illustrated upthread by the $6,000 metals book). Neither do graphic novels.
The 250-page bound novel is also an artifact of the book store distribution channel. It may indeed be that to command a $20 price instead of a $9.99 Kindle standard price, authors will need to break out of the straightjacket of 250 page bound novels.
On the other hand, as long as publishers insist on DRM, the cost of setup for the encryption software and serialization of a new encrypted file for download -- including payments to the company that produced the DRM server -- may exceed the cost of that paperback.
For contractual reasons book pricing is set on the basis of the current edition in print (royalty percentages aren't static but vary with the paper edition's binding, the number sold, the discount channel, and so on), and publishers are required to provide transparent accounting to authors if challenged. So their accounting workflow for shipping ebook units has to shadow the workflow for shipping SKUs. Hachette spent roughly 20M euros building a "digital warehouse" for ebook serialization and accounting a few years ago; I'm sure the other big six did likewise. They can't do anything else, unless they renegotiate their contract boilerplate with the authors.
Meanwhile, fixed costs for editing, typesetting, design, proofreading, and marketing are identical for paper books and ebooks.
This is the second comment here that brought up editing, typesetting, &c. Is it the view of people in the publishing industry that books should be priced at a % markup over total costs? Because that seems crazy.
However, thanks to the evolution of printing technology, the auction only hits a few (typically 2-3) price points, and they're geared against physical format -- hardcover, A format paperback, C format, and so on. So consumers confuse the reverse auction process with the cost of a physical product.
To make matters worse, between 45% and 75% of the cover price of a physical book in a bookstore goes to the distribution chain -- bookshops and wholesalers (not the publisher or author). The chains do deep discounting for commercial reasons of their own, e.g. price wars with each other, special promotions, need to get rid of old stock to make room for new, and so on.
Thus, the actual price the publisher and author get for a book may bear little or no relationship to the price the consumers are charged for it in the shops or from Amazon.
(EDIT) People in this thread are making the common mistake of assuming the publishing industry is structured this way for some reason. It isn't. Things just happen this way because they're the sum intersecting set of business practices that didn't result in someone going bust at some point in the past 200 years. And they're locked in by contracts, established processes, and custom. This isn't a modern industry like software development: it's an ancient set of practices that have evolved over time, and many of its patterns reflect obsolete constraints that no longer exist.
Putting that aside, in the brave new future where StrossCorp publishes all Stross-approved titles: do you envision pricing according to a small industrywide set of price points, and, in particular, adhering to a fixed "ebooks cost $9.99" price?
Unfortunately for a publisher to try this would require (a) all new contractual boilerplate (which will be a whole barrel of laughs as they try to get the authors and their agents to accept it) and (b) new accounting procedures to calculate royalties based not on the net volume of sales but on the time from publication date of those sales.
And even then, this is only going to work out if customers are willing to wait until the book meets their criteria for affordability rather than going in search of a pirate copy of the text.
That's all beside the point that utility determines price, not cost, although I'm not sure that's strictly true: I think that the perception of utility determines price. Because the perceived utility of an ebook is less for many people, party for practical reasons and partly because they perceive that the cost is less, they perceive that the price should be lower.
It's a beguiling idea. Even realising that production costs for ebooks aren't any lower, I still baulk at ebook pricing.
My point was that those costs don't change, but they're frequently not considered when consumers are thinking about the 'cost' of what they're buying and the perceived cost impacts on people's perceived value for some items.
Arguing that pricing your product based on its cost is mad doesn't really change that consumers feel that digital downloads should be priced less than physical media versions, even if the digital download has greater utility.
There clearly are ways in which bits are less valuable than ink, but my gut sense is that for most people, that's more than made up for by the ways bits are more valuable.
It might be more convenient from a storage perspective, but it turns out you aren't actually buying a 'thing' when you buy an e-book, you are buying a license to a 'thing'.
My automatic assumption was that the crappy paperback version and the ebook version should be about the same price, but thinking about it from a perspective of what I own, the ebook should be significantly less.
The quality of not taking up space and needing to be physically discarded when they are obsolete is indeed worth something!
Right now all my purchased books are used, the publisher and author get nothing for them and I buy them because they are 4-7 dollars (mass market-hard cover) at my local bookstore.
My bookstore is however 30 minutes away and if I were to find an ebook version for 4 dollars you can bet your ass I'm buying that copy, but right now my kindle is a project gutenberg ereader. I did buy two books on my kindle when I first got it, but about a month after my kindle gift the publishers decided that 5.99-7.99 for older books and 9.99 for new books was too little and I went back to used.
Edit: Also right now the pirate market for books is growing at an amazing rate because a large amount of users can't justify the 15-20 dollars for some ebooks but still want to use their ereaders.
Those bits you paid for, they are rotting. The flash memory that stores them is leaking electrons and decaying. 5-10 years from now, your purchase may well evaporate into entropy unless you take great pains to move it from media to media. That is, if this is even allowed by your locked-down hardware.
How is something so ephemeral actually worth more than a physical artifact?
I'm not going to argue that there aren't people who value archival formats. There clearly are.
However, it's not the job of a pricing scheme to ensure that everyone buys your product. Almost the sole job of a pricing scheme is to maximize the revenue stream commanded by the product. Literally the first step in designing a pricing scheme is to study the market, segment it by perceived value, and then price the product to attract the largest (Buyer x Price).
So, I humbly suggest: irrational attachment to physical objects as carriers of bits aside, for most people (not you, but most), the value of pure digital forms dwarfs the archival value of ink.
I just convert the ones I want to keep to ePub and put them into Dropbox. Then they are backed up and instantly available to all my machines as well as being backed up by my computer's normal backup mechanism.
Thing is, most people just read them. They don't need to search through them or even highlight. It's entertainment. It's only when we enter the realm of non-fiction -- and specialized non-fiction, at that -- can you make some sort of case for that argument. But even then, try arguing with someone that a pop star biography should be priced higher than other pop fiction books because they can "search" in it and be met with blank stares. Which I would agree with!
They automatically remember your place.
You can get a new one by clicking a button.
Those are bigger advantages than the CD had over casette tapes.
In a lot of ways, many of them relevant to my mom, paper books suck compared to e-books.