Why Do Book-Sellers Discount Popular Books?
By Bryan Caplan
I’ve heard the question before, but this time, it’s personal: Amazon just sharply slashed the price of my book to $19.77.
The standard answer is that the (absolute value of) elasticity of demand is higher for more popular books. The more people willing to buy a book at list price, the higher the percentage increase in sales if you cut the price.
Is that the real reason? Anyone got a better theory? And if you believe the standard theory, has anyone got any intuition on why popularity and elasticity would be so correlated?