Henry over at Crooked Timber wants to know why some books are so expensive. The answer is that the books he has in mind are textbooks and the person choosing the textbook isn’t the one paying the price. In effect, the professor is buying the book but with someone else’s money. Hmmm, does this remind you of any other markets? Here’s a hint, the 3rd edition of Health Economics by Charles Phelps is $122.60. Here’s another application.
Addendum: Mark Steckbeck has a nice post explaining one reason why textbooks prices have increased in recent years. The internet has made resale easier thus adding to the book’s value and, as publishers realize that demand has increased, to the book’s price. Interesting possibility mentioned by Mark is that increases in nominal prices are consistent with decreases in real (after resale) prices.