Question

THE ECONOMICS AND ETHICS OF TEXTBOOK PRICING

Several students were gathered around the section of the College Bookstore where business textbooks were shelved. Martin Tremayne heard comments about the outrageous and unethical prices being charged for the required books and that the cruel publishers were profiteering at the mercy of students. Martin decided to delay the purchase the Business Ethics book he had come to get. Later over a coffee, Martin reflected about the incident. He had enough money with him to purchase the book but didn’t want do so in front of his angry colleagues. Martin was having a good time at college. He was in a co-operative program and the work terms that paid most of his expenses. He lived at home, but had car payments and maintenance expenses. He had taken a couple of trips to the Caribbean while at college and attended several concerts in Toronto and New York. Overall, he has enjoyed his time at college. Page 85 Martin decided to find out about the textbook publishing industry and what caused the high prices. The industry was unusual in that textbooks were selected by professors who did not have to purchase them, that is, students were captive consumers in that they are required to purchase the book. The publishers market to professors and most selected the best textbook to meet the requirements for the course and seldom considered the price. According to studies, the cost of textbooks had increased about four times faster than the Consumer Price Index resulting in many universities and colleges becoming concerned about possible overpricing. On average, students spent between $500 and $1,000 per semester on textbooks and other course materials. The publishers claimed that textbook publishing was competitive and that they were not profiteering. To ensure quality, textbooks were subject to an extensive reviewing process often involving 30 reviews. Textbooks were published on high quality paper, unlike trade publications, and involved sophisticated design with colour, graphs, indices, and photos. Publishers developed a large selection of books, not all of which were successful and some lose money. In addition, publishers had to provide instructor’s manuals, lecture slides, test banks, and online platforms for each book. The publishers received 80 per cent of the retail price with the bookstores receiving the remainder. Universities had responded in several ways. They suggested that professors change textbooks and editions only when absolutely necessary so that there was a second-hand market for the books. Some encouraged professors to assign books from the Open Textbook Library or Project Gutenberg where books were available for free online. The books were written by academics and were adequate for some courses. The use of other Internet materials was encouraged but quality control was a problem. Other universities started renting textbooks, most book stores purchased textbooks for resale, and sometimes several copies were put on reserve in the library. Some textbooks were published as digital copies which somewhat cost less, but these editions had expiration dates, cannot be copied and printing is limited. Students may have e-readers, but some still preferred the paper edition. Students complained that new editions were published forcing them to buy new books despite minor changes, and often professors sometimes only used a small portion of the book. With increasing tuition fees and living expenses, students were accumulating increasing amounts of debt. The more money spent on textbooks meant less for food, transport, health, and leisure. Martin wondered whether to go back and purchase the textbook or investigate other ways to obtain it.

Questions

1.What fundamentals of capitalism are relevant to this case?

2. Who are the stakeholders and what are the issues along the supply chain for textbooks?

3. Are textbooks too expensive? Is money spent on textbooks a legitimate expense in the educational system? case study answers

Answer 1

1)Capitalism means a economic system where the market is under control of private players without government's interventions. The very basic fundamental of capitalisms are being profit motive and private players being able to fix price at their own willingness. As given in the case study that the prices of books are raised and students taking it as publishers trying to make profit out of it. It is given in the case study that publishers are contacting professors and selected the best textbook to meet the requirements as per the course structure but hardly gave an attention to price. By this statement, it is evident that prices of books are not taken into consideration at all hence they wanted to earn more of money. Also it is given in the case study that prices increased by 4times as compared to CPI and has made many universities and colleges concerned about the high prices. Thus profit as a motive can be noted here along with it as the increase in price is not fixed by the market rather by the firm/ publishers. Hence this shows the basic fundamental of capitalism, which are being profit motive and being able to fix price.

2) Stakeholders are those people or group of people who are someway related to the specific organisation. In this case, the most important stakeholder of the textbooks are students. They are in utmost need for the book to complete their studies as per the course. The issues relating to the supply of textbooks are mentioned in the case study. The case study specifies that textbooks are being marketed to professors thus making it highly demanding by students. Also due to questions banks, lectures, slides and all other additions to textbooks publishers took 80% of the retail value thus increasing the cost price by the retailers in order to get more value for each books. Also professors at times asking for new editions of books made it high priced. Supply side of books were affected as said by publishers that reviewing was done which is an extensive process to maintain quality thereby increasing prices.

3) Textbooks as mentioned by the case study seem to be expensive as it is affecting the lives of students. Hence here it can be said as expensive. Also normally, textbooks are at times expensive , mostly they are not as it relates to education and students being unemployed are not able to pay more money for it. Also as mentioned in the passage that textbooks made some minor changes like addition of colored items, graph, photo, also quality of paper is now better, are not by which a textbook is deemed to be beneficial. The content in the textbook is the main focus. Hence though money spent on education is a legitimate expense as it relates to one's future and prosperity and education can bring a change in the lives of people hence it must be given a priority. However as mentioned in the case study, the unusual high prices for textbooks are not acceptable to everyone though expenses for education being a legitimate expense because not everyone is able to afford high prices. Along with textbooks, numerious other facilies are required like hostel facility, tution fees etc which makes education at times costly and if prices of textbooks are also increased just because of some changes in paper quality or coloured photos or graphs, it is a scam to take money from people because quality matters, contextual clarity matters which can be made accessible at lower cost.