Internet Exchanges for Used Books: An Empirical Analysis of Product Cannibalization and Welfare Impact
Information systems and the Internet have facilitated the creation of used product markets that feature a dramatically wider selection, lower search costs, and lower prices than their brick-andmortar counterparts do. The increased viability of these used product markets has caused concern among content creators and distributors, notably the Book Publishers Association and Author’s Guild, who believe that used product markets will significantly cannibalize new product sales. However, this proposition, while theoretically possible, is based on speculation as opposed to empirical evidence. In this paper, we empirically analyze the degree to which used products cannibalize new product sales for books - one of the most prominent used product categories sold online. To do this, we use a unique dataset collected from Amazon.com’s new and used book marketplaces to measure the degree to which used products cannibalize new product sales. We then use these estimates to measure the resulting first-order changes in publisher welfare and consumer surplus.
Publication Year: 2005
Type: Working Paper
Working Paper Number: 27
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