On Killing off the Market for Used Textbooks and the Relationship between Markets for New and Secondhand Goods

Are secondhand copies of textbooks a drain on publishers' and authors' profits? Publishers' representatives have no doubts on the matter. I have talked with several about the "problem" and about some companies' efforts to reduce secondhand sales. One is said to have aimed for "instant destruction" by including answer pages in books to be torn out and handed in to the instructor, decreasing the value of used copies. That the publishers' representatives have some support from professional economists is clear from this statement in the preface to a widely used textbook in price theory: "Since everyone knows the basic reason for a revised edition is to kill off the existing used book market, it would be idle to suggest otherwise."' It is sometimes said, on the other hand, that the initial price captures the present value of all subsequent transactions so that used items do not in fact compete with new ones. The buyer of a newly produced diamond pays a price consistent with what the diamond can be sold for to others including members of later generations. Textbooks and diamonds do differ. The cost of producing additional textbooks after setup costs falls more dramatically than the cost of producing additional diamonds. It costs more to produce a hardcover book than a paperback, whereas the cost of producing a diamond is independent of its life and number of uses. And a used textbook, unlike a used diamond, is seldom a perfect substitute for a new one. But are these differences important? Would publishers and authors be better off if they could kill off the secondhand market for their products? The problem is more complex than some appear to suppose as well as analytically similar to problems arising in other contexts in economic theory.2