Tuesday, October 28th, 2014 9:42 am

Amazon and Market Power

Question A: Amazon has monopsony power in the market for books that is significantly reducing the supply of books.

Responses
 

Source: IGM Economic Experts Panel
www.igmchicago.org/igm-economic-experts-panel

Responses weighted by each expert's confidence

Source: IGM Economic Experts Panel
www.igmchicago.org/igm-economic-experts-panel

Question B:
Amazon has sufficient monopsony power that regulatory intervention is likely to make consumers of books better off, taking into account implementation costs and the effect of intervention on incentives.

Responses
 

Source: IGM Economic Experts Panel
www.igmchicago.org/igm-economic-experts-panel

Responses weighted by each expert's confidence

Source: IGM Economic Experts Panel
www.igmchicago.org/igm-economic-experts-panel

Question A Participant Responses

Participant University Vote Confidence Comment Bio/Vote History
Acemoglu Daron Acemoglu MIT Disagree 4
Bio/Vote History
         
Alesina Alberto Alesina Harvard Did Not Answer
Bio/Vote History
         
Altonji Joseph Altonji Yale Uncertain 4
Amazon has some monopsony power but its platform is probably making author access easier.
Bio/Vote History
         
Auerbach Alan Auerbach Berkeley Disagree 3
Bio/Vote History
         
Autor David Autor MIT Agree 10
In general, Amazon is not using its monopsony to reduce supply. But in the case of Hachette books, it certainly is.
Bio/Vote History
         
Baicker Katherine Baicker Chicago No Opinion
Bio/Vote History
         
Banerjee Abhijit Banerjee MIT Uncertain 8
Bio/Vote History
         
Bertrand Marianne Bertrand Chicago Disagree 2
Bio/Vote History
         
Brunnermeier Markus Brunnermeier Princeton Disagree 6
Bio/Vote History
         
Chetty Raj Chetty Stanford Uncertain 5
Bio/Vote History
         
Chevalier Judith Chevalier Yale Disagree 9
It seems likely that Amazon is on net raising author income in the part of the distribution where the supply restriction would be.
Bio/Vote History
         
Currie Janet Currie Princeton Uncertain 6
Bio/Vote History
         
Cutler David Cutler Harvard Uncertain 5
Bio/Vote History
         
Deaton Angus Deaton Princeton Strongly Agree 8
Seems like a matter of public record!
Bio/Vote History
         
Duffie Darrell Duffie Stanford Uncertain 5
Amazon might instead use its market power to reduce its costs, or to limit entry by other suppliers. I need to know more to be confident.
Bio/Vote History
         
Edlin Aaron Edlin Berkeley Did Not Answer
Bio/Vote History
         
Eichengreen Barry Eichengreen Berkeley Uncertain 5
Bio/Vote History
         
Einav Liran Einav Stanford Disagree 6
Bio/Vote History
         
Fair Ray Fair Yale Strongly Disagree 7
Bio/Vote History
         
Finkelstein Amy Finkelstein MIT Did Not Answer
Bio/Vote History
         
Goldberg Pinelopi Goldberg Yale Did Not Answer
Bio/Vote History
         
Goolsbee Austan Goolsbee Chicago Uncertain 1 Bio/Vote History
         
Greenstone Michael Greenstone Chicago Disagree 3
Bio/Vote History
         
Hall Robert Hall Stanford Disagree 2
Complicated issue. The main bone of contention so far has been its policy of low pricing for ebooks. Not sure of the effects on authors.
Bio/Vote History
         
Hart Oliver Hart Harvard Disagree 7
Classic monopsonists reduce supply; final prices rise. This doesn't describe Amazon.I don't know evidence that book supply is lower.
Bio/Vote History
         
Holmström Bengt Holmström MIT Uncertain 4
Bio/Vote History
         
Hoxby Caroline Hoxby Stanford Uncertain 10
There appears to be no soundly derived empirical evidence for this claim. I read every article related to this and its just not there.
Bio/Vote History
         
Hoynes Hilary Hoynes Berkeley Did Not Answer
Bio/Vote History
         
Judd Kenneth Judd Stanford Strongly Disagree 8
Too many alternatives, too much potential entry.
Bio/Vote History
         
Kaplan Steven Kaplan Chicago Uncertain 5
Bio/Vote History
         
Kashyap Anil Kashyap Chicago Disagree 1
Bio/Vote History
         
Klenow Pete Klenow Stanford Disagree 3
Bio/Vote History
         
Levin Jonathan Levin Stanford Did Not Answer
Bio/Vote History
         
Maskin Eric Maskin Harvard Agree 7
This follows from standard textbook analysis.
Bio/Vote History
         
Nordhaus William Nordhaus Yale Agree 4
Unclear what counterfactual is. Without Amazon? Or with Amazon and no market power?
Bio/Vote History
         
Saez Emmanuel Saez Berkeley Disagree 3
Bio/Vote History
         
Samuelson Larry Samuelson Yale Uncertain 1
Compared to no electronic market, Amazon has probably increased supply. Compared to a "competitive electronic market," probably not.
Bio/Vote History
         
Scheinkman José Scheinkman Princeton Agree 6
Amazon's policies are probably reducing the supply of ebooks.
Bio/Vote History
         
Schmalensee Richard Schmalensee MIT Uncertain 6
Some monopsony power, sure; significant impact on supply, possible but not especially likely.
Bio/Vote History
         
Shapiro Carl Shapiro Berkeley Disagree 9
Bio/Vote History
         
Shimer Robert Shimer Chicago Strongly Disagree 8
Maybe in the future, certainly not now.
Bio/Vote History
         
Thaler Richard Thaler Chicago Uncertain 1
Amazon greatly increases the availability of most books, esp academic books, but is making it hard to get some books. So how to answer?
Bio/Vote History
         
Udry Christopher Udry Yale Strongly Disagree 5
Amazon has some monopsony power, but weak. And lower transaction costs of books on balance positive.
-see background information here
Bio/Vote History
         

Question B Participant Responses

Participant University Vote Confidence Comment Bio/Vote History
Acemoglu Daron Acemoglu MIT Disagree 4
Bio/Vote History
         
Alesina Alberto Alesina Harvard Did Not Answer
Bio/Vote History
         
Altonji Joseph Altonji Yale Strongly Disagree 4
Intervention is costly and premature. So far, book consumers have probably benefited.
Bio/Vote History
         
Auerbach Alan Auerbach Berkeley Uncertain 5
Bio/Vote History
         
Autor David Autor MIT Agree 6
Intervention could be as simple as a stern warning. At present, Amazon is heading towards a market position that is anti-competitive.
Bio/Vote History
         
Baicker Katherine Baicker Chicago No Opinion
Bio/Vote History
         
Banerjee Abhijit Banerjee MIT Uncertain 7
Bio/Vote History
         
Bertrand Marianne Bertrand Chicago Uncertain 2
Bio/Vote History
         
Brunnermeier Markus Brunnermeier Princeton Agree 4
Strategic delayed shipping of books from certain publishing houses and other measures can hurt consumers.
Bio/Vote History
         
Chetty Raj Chetty Stanford Disagree 5
Bio/Vote History
         
Chevalier Judith Chevalier Yale Disagree 8
Currently I cannot identify a specific practice that it would be sensible to address with a regulatory intervention.
Bio/Vote History
         
Currie Janet Currie Princeton Uncertain 6
Bio/Vote History
         
Cutler David Cutler Harvard Uncertain 6
Bio/Vote History
         
Deaton Angus Deaton Princeton Disagree 5
Who knows what would happen, but seems unlikely to end well.
Bio/Vote History
         
Duffie Darrell Duffie Stanford Uncertain 5
Maybe publishers and authors are those to most benefit from regulatory protection. I would need more information in order to better guess.
Bio/Vote History
         
Edlin Aaron Edlin Berkeley Did Not Answer
Bio/Vote History
         
Eichengreen Barry Eichengreen Berkeley Uncertain 5
Bio/Vote History
         
Einav Liran Einav Stanford Uncertain 5
Bio/Vote History
         
Fair Ray Fair Yale Strongly Disagree 7
Bio/Vote History
         
Finkelstein Amy Finkelstein MIT Did Not Answer
Bio/Vote History
         
Goldberg Pinelopi Goldberg Yale Did Not Answer
Bio/Vote History
         
Goolsbee Austan Goolsbee Chicago Uncertain 1
Bio/Vote History
         
Greenstone Michael Greenstone Chicago Disagree 3
Bio/Vote History
         
Hall Robert Hall Stanford Disagree 2
Bio/Vote History
         
Hart Oliver Hart Harvard Disagree 7
I don't see evidence that consumers and authors are suffering. The market is fast-moving. Regulators should monitor but be cautious.
Bio/Vote History
         
Holmström Bengt Holmström MIT Uncertain 4
Bio/Vote History
         
Hoxby Caroline Hoxby Stanford Uncertain 10
There is evidence of higher diversity & price elasticity in online book retail so there would need to be serious evidence to offset this.
Bio/Vote History
         
Hoynes Hilary Hoynes Berkeley Did Not Answer
Bio/Vote History
         
Judd Kenneth Judd Stanford Strongly Disagree 8
Bio/Vote History
         
Kaplan Steven Kaplan Chicago Uncertain 5
Bio/Vote History
         
Kashyap Anil Kashyap Chicago No Opinion
Bio/Vote History
         
Klenow Pete Klenow Stanford Disagree 3
Bio/Vote History
         
Levin Jonathan Levin Stanford Did Not Answer
Bio/Vote History
         
Maskin Eric Maskin Harvard Uncertain 7
Monopsony power helps lower Amazon's costs, enabling then to set lower consumer prices.
Bio/Vote History
         
Nordhaus William Nordhaus Yale Uncertain 5
Unclear question. If regulation = antitrust, yes. Otherwise, probably not but unclear what that might be.
Bio/Vote History
         
Saez Emmanuel Saez Berkeley Disagree 4
Bio/Vote History
         
Samuelson Larry Samuelson Yale Agree 8
Electronic markets are full of network externalities, which should be recognized as a form of natural monopoly.
Bio/Vote History
         
Scheinkman José Scheinkman Princeton No Opinion
Bio/Vote History
         
Schmalensee Richard Schmalensee MIT Strongly Disagree 6
Just because there's monopsony (or monopoly) power doesn't mean there is a regulatory fix, and I don't see one here.
Bio/Vote History
         
Shapiro Carl Shapiro Berkeley Disagree 8
The press reports I have seen have not yet identified any conduct by Amazon that appears to be an antitrust violation.
Bio/Vote History
         
Shimer Robert Shimer Chicago Disagree 6
Bio/Vote History
         
Thaler Richard Thaler Chicago Uncertain 1
Too vague to answer. What sort of regulation? By whom?
Bio/Vote History
         
Udry Christopher Udry Yale Strongly Disagree 6
Bio/Vote History
         

10 New Economic Experts join the IGM Panel


For the past two years, our expert panelists have been informing the public about the extent to which economists agree or disagree on important public policy issues. This week, we are delighted to announce that we are expanding the IGM Economic Experts Panel to add ten new distinguished economists. Like our other experts, these new panelists have impeccable qualifications to speak on public policy matters, and their names will be familiar to other economists and the media.

To give the public a broad sense of their views on policy issues, each new expert has responded to a selection of 16 statements that our panel had previously addressed. We chose these 16 statements, which cover a wide range of important policy areas, because the original panelists' responses to them were analyzed in a paper comparing the views of our economic experts with those of the American public. You can find that paper, by Paola Sapienza and Luigi Zingales, here. The paper, along with other analyses of the experts' views, was discussed during the American Economic Association annual meetings, and the video can be found here.

The new panelists' responses to these statements can be seen on their individual voting history pages. Our ten new economic experts are:

Abhijit Banerjee (MIT)
Markus K. Brunnermeier (Princeton)
Liran Einav (Stanford)
Amy Finkelstein (MIT)
Oliver Hart (Harvard)
Hilary Hoynes (Berkeley)
Steven N. Kaplan (Chicago)
Larry Samuelson (Yale)
Carl Shapiro (Berkeley)
Robert Shimer (Chicago)


Please note that, for the 16 previous topics on which these new panelists have voted, we left the charts showing the distribution of responses unchanged. Those charts reflect the responses that our original panelists gave at the time, and we have not altered them to reflect the views of the new experts.

We have also taken this opportunity to ask our original panelists whether they would vote differently on any of the statements we have asked about in the past. Several experts chose to highlight statements to which they would currently respond differently. In such cases, you will see this "revote" below the panelist's original vote. We think you will enjoy seeing examples of statements on which some experts have reconsidered.

As with the 16 previous statements voted on by new panelists, these "revote" responses are not reflected in the chart that we display showing the distribution of views for that topic: all the charts for previous questions reflect the distribution of views that the experts expressed when the statement was originally posed.

About the IGM Economic Experts Panel

This panel explores the extent to which economists agree or disagree on major public policy issues. To assess such beliefs we assembled this panel of expert economists. Statistics teaches that a sample of (say) 40 opinions will be adequate to reflect a broader population if the sample is representative of that population.

To that end, our panel was chosen to include distinguished experts with a keen interest in public policy from the major areas of economics, to be geographically diverse, and to include Democrats, Republicans and Independents as well as older and younger scholars. The panel members are all senior faculty at the most elite research universities in the United States. The panel includes Nobel Laureates, John Bates Clark Medalists, fellows of the Econometric society, past Presidents of both the American Economics Association and American Finance Association, past Democratic and Republican members of the President's Council of Economics, and past and current editors of the leading journals in the profession. This selection process has the advantage of not only providing a set of panelists whose names will be familiar to other economists and the media, but also delivers a group with impeccable qualifications to speak on public policy matters.

Finally, it is important to explain one aspect of our voting process. In some instances a panelist may neither agree nor disagree with a statement, and there can be two very different reasons for this. One case occurs when an economist is an expert on a topic and yet sees the evidence on the exact claim at hand as ambiguous. In such cases our panelists vote "uncertain". A second case relates to statements on topics so far removed from the economist's expertise that he or she feels unqualified to vote. In this case, our panelists vote "no opinion".

The Economic Experts Panel questions are emailed individually to the members of the panel, and each responds electronically at his or her convenience. Panelists may consult whatever resources they like before answering.

Members of the public are free to suggest questions (see link below), and the panelists suggest many themselves. Members of the IGM faculty are responsible for deciding the final version of each week’s question. We usually send a draft of the question to the panel in advance, and invite them to point out problems with the wording if they see any. In response, we typically receive a handful of suggested clarifications from individual experts. This process helps us to spot inconsistencies, and to reduce vagueness or problems of interpretation.

The panel data are copyrighted by the Initiative on Global Markets and are being analyzed for an article to appear in a leading peer-reviewed journal.

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