The Textbook Bubble?

The NYT hosts a fascinating debate on the market for textbooks. On July 1, a new set of federal rules come into effect in an effort to lower prices for textbooks. As an investor, I always take notice when the government enters a market because prices and profits can soon get very screwy.
By any standard, the market for textbooks is dysfunctional. James V. Kock writes:

The textbook market is like the pharmaceutical market: the people who have the most influence over what is purchased (doctors and professors) don’t have to pay for their choices. Students do.
Further, several studies indicate that most professors don’t even know the cost of the textbooks they recommend, or that this is a minor factor in their choices. This makes the demand for textbooks “price inelastic” — student buyers are insensitive to price increases.

Posted by on July 27th, 2010 at 10:26 am


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