Internet Exchanges for Used Books: An Empirical Analysis of Product Cannibalization and Welfare Impact
Authors: Ghose, Anindya; Smith, Michael D.; Telang, Rahul
Journal: Information Systems Research (2006)
<jats:p> 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-and-mortar counterparts do. The increased viability of these used-product markets has caused concern among content creators and distributors, notably the Association of American Publishers and Author’s Guild, who believe that used-product markets will significantly cannibalize new product sales. </jats:p><jats:p> 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 data set 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. </jats:p><jats:p> Our analysis suggests that used books are poor substitutes for new books for most of Amazon’s cust…