Not since Gutenberg printed his first Bible has the book industry undergone such rapid and widespread change. Digital technology has revolutionized the industry and expanded the very definition of what makes a book. Paper books, e-books, self-publishing, books promoted by social media and uploaded straight to our Kindles: all are viable options in publishing’s brave new world.

The book industry has been marked by four distinct phases of technological advances: the Civil War period, World War I, World War II, and the modern period of high-tech development. Today, bookstores are dwindling and the Internet is the preferred marketplace for both buyers and sellers. Consumers are increasingly reading books in digitized form on electronic devices. Feedbacks in the old Structure, Conduct, and Performance paradigm have made predictions difficult in the industry. We apply methods of analysis that view industry players’ rivalry behavior in a gaming setting, taking a new perspective on price and nonprice competition that also encompasses bidding, advertising, and R&D expenditures that have become important dimensions of the market order of the industry.

When supply is drastically modified by new technology, it takes on a dimension of shock, resulting in models that contain incomplete information content and more challenging exogenous and endogenous phenomena. We identify new demand parameters for the industry. Consumers can now comparison-shop for bargains and choose between different ways to read books and allocate their time. These options determine their consumption and human capital formation. While technological advances in this industry are now at the General Purpose level, their role still seems unsettled. Advancement in the book industry is of the modern endogenous growth type associated with increasing returns as capital accumulates. The resulting competitive behavior between firms adheres to discriminating pricing in an imperfect market structure within the new global technological environment.

Consumption is a driver of the book industry, and therefore impacts profits as the state of the economy changes. The overall state is that production rates are almost twice as large as consumption rates—but prices remain high, partly because they are traditionally cost-push in nature. The highest-cost aspects of the industry have traditionally been paper, platemaking, printing, binding, and book returns. Information technology is changing those costs as book production moves online or overseas. As a result, the industry has experienced some severe short-term business cycles that have been devastating to firms like Borders Books, which exited the industry in 2011. Our empirical study shows that price is elastic for all major book categories, indicating that price competition is still alive, though the industry also practices nonprice competition.

Production aspects of the book industry are in a state of perpetual mobility, with printed books facing strong competition from virtual space, Print on Demand (PoD), and e-books technologies. Our empirical analysis attempts to reconcile contrary views about increasing and constant returns to scale, using generally available data and standard econometric techniques. We embrace both the simple Cobb-Douglas and CES models of production. The Cobb-Douglas model indicates constant returns with weak statistical results, while the CES model indicates increasing returns. The overall results are subject to wide interpretation, underscoring a monopolistic structure, or a bilateral monopolistic model. The results also have an impact on the modern discussion of increasing returns, which is normally sourced to the socialization of modern technological advances.

Distribution channels for books have evolved from small bookstores, to larger superstores, to the more impersonal Internet. Larger bookstores seem to have a dominant position in these activities through mergers and cooperations, yet this does not show up as high concentration for the industry. On the average, the concentration seems to be held in check from cooperation with smaller independent firms for the purpose of reaching customers in the suburbs or as independent suppliers on the Internet. Nevertheless, sales remain responsive to concentration, which in turn is responsive to mergers and an index of market power. Some modern distribution problems are also related to inventory management.

International competition requires the estimates of consumer, producer, and welfare optimum in a general equilibrium framework to account for how agents make substitution within countries. The world flow of GDP and FDI concentrates among the three regions of North America, Europe, and Asia. Our analysis proceeds with an eye for free trade according to the classical hypothesis, and a preference for domestic adjustment according to the Keynesian hypothesis for these regions. North America and Europe did much better under the classical than under the Keynesian hypothesis. Some countries, such as China and India in Asia, the United Kingdom, France, and Germany in Europe; and the United States in North America are spotlighted for more extended analysis.

Books possess inherent characteristics that make them a natural product to buy and sell online. They are easy to ship, inexpensive to warehouse and inventory, easy to review and rate, can be test read, and can easily be searched. The Internet provides a widened audience with low-cost, 24-hour access to a diverse world of selections. The Internet is the battlefield at the conjunction of production, consumption, and distribution, and has become more and more competitive for book publishers. The Internet has made value chains more efficient, particularly in the area of digitized books, where digital information is available to intermediaries who produce books from the digital copies. Accounting records are kept of various sales transactions by region, creating a source of information economies.

Historically speaking, the book publishing industry has undergone four landmark waves, the results of new and evolving technologies. The Civil War period saw the first major boost to book publishing, as industrial activities began to dominate agriculture, giving rise to informational books that explained various industries. World War I spurred the invention of radio communication, aviation, and photography, creating another wave of publications for interested readers. World War II witnessed a proliferation of how-to books, addressing the needs of a large population of unskilled laborers who were called to task. The modern wave gets its boost from the advent and constant evolution of the Information Technology field.