Exceeding even the housing bubble, the run-up in college textbook prices has been astronomical. That 812 percent increase (below) means that anyone currently earning close to the minimum wage has to work approximately 35 hours to buy one copy of Mankiw’s Economics (discounted Amazon price is $279.95).
Economics actually does a pretty good job of explaining why the price is so high. We just have to look at market structure. Because the instructor chooses the one book students have to read, we could say the seller has a monopoly. Bestowed monopoly status, textbook sellers have considerable power over price.
Then, further inflating the pricing bubble, the participants in the transaction have different incentives. Selecting texts, college instructors and students have different objectives. Because instructors do not pay for the books they choose, they have less incentive to worry about price.
Our Bottom Line: Opportunity Cost
For making and understanding decisions, opportunity cost charts come in handy. You can see below how the benefits for instructors and students diverge considerably. It makes sense that neither group wants to forego a list of alluring benefits.
It might not be a mystery that we have a college textbook bubble.
The mystery is why the bubble has not burst.