On Amazon.com, there are three versions of Keynes’ famous General Theory : a har

Question

On Amazon.com, there are three versions of Keynes’ famous General Theory: a hardcover for $19.79, paperback for $8.82, and a Kindle version for $2.99. There is not much difference in the cost of production between hardcover and paperback books (though there likely is for the Kindle e-book version), but hardcover books do tend to be published earlier than paperback versions of the same book. How do you explain the wide variety of prices for basically the same book?

Select one:

a. The market for hardcover books has more demand and less supply than the market for paperbacks, which likewise has more demand and less supply than the market for e-books. The equilibrium prices all reflect these differences.

b. Price discrimination between demanders. High demanders are willing to pay a high price for a hardcover that is published early. Low demanders aren't, and are only willing to pay low price for later paperback. It is much cheaper to produce the Kindle version (MC probably close to zero), and not many buyers (people with Kindles, less D) lead to lowest price.

c. Even though the cost of production between hardcover and paperback is small, demand is highly elastic, so this small cost difference results in a large price difference. The cost difference between paperback and e-books is larger, resulting in the smaller gap between paperback and e-book prices.

d. Price discrimination between demanders. Kindle owners are high demanders since the format is not compatible with anything but Kindles. Hardcover buyers are low demanders since there aren't many who would want a hardcover when paperbacks or e-books are cheaper. There are more paperback buyers, so they pay a price between these two extremes.

Explanation / Answer

Option b "Price discrimination between demanders. High demanders are willing to pay a high price for a hardcover that is published early. Low demanders aren't, and are only willing to pay low price for later paperback. It is much cheaper to produce the Kindle version (MC probably close to zero), and not many buyers (people with Kindles, less D) lead to lowest price."

Here high demanders mans demanders that have haigh value for the product. Demanders with high value for book would like to have the book straight away (and may value higher-quality binding), and lower-value readers, that are low demanders, are prepared to wait for release of a lower-price version.

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