Tuesday, May 24, 2005

The optimal number of campus bookstores, or, are shortages inevitable? 

What is the correct number? One might think competition is better, but I had reason to question this today.

My course had 30 seats available, and several weeks ago I sent a request to the campus bookstore for them to be sure to have thirty copies of my text available. This information is spread to all four bookstores that service SCSU. Nineteen students are currently enrolled in the class, but I find I haven't enough textbooks, as students reported to me this morning. We found only fifteen.

Panicked, I had my office manager call around the bookstores while I taught class. She reported back that one of the stores had dug up two books that AM, and two other bookstores had them on rush order. Thursday, one said. The other thought maybe tomorrow. Since it's only a three week class and Memorial Day weekend lurks, this is creates a serious problem for my students.

Now the question is how this could happen with four bookstores on or near campus. The answer, of course, is that each bookstore is assuming the others will pick up the slack. "We don't order for full enrollments because of the other bookstores," said one to my office manager. And that makes some sense, since there are costs of warehousing, freight on returns, and perhaps restocking fees. (I don't know about the last other than what others have told me when I've asked.) And this isn't the only campus on which this is a problem: Google says Kentucky, Pace and U. New Brunswick also had this.

Bookstores insist they aren't making very much money, perhaps no more than $1.25 on a $50 textbook. Margins on new textbooks tends to be 22.5%, but universities will capture a good bit of that back from the bookstore in terms of contributions to the athletic program or scholarships. Nationwide, fulltime students typically spend $850 on books and 9% of the sales come back to colleges. It's likely that SCSU receives upward of $1 million from the bookstores.

In return for that, you'd think they'd find a way for my students to actually get their books.

So what to do? The problem here was a noncooperative game between the bookstores trying to stick the costs of returned texts on other bookstores. We get a sub-optimal equilibrium. One solution would probably be to reduce the number of sellers to one. They'd have nobody to game with and probably order more books, but students would pay more. Controlling the price they are sold at would result in reduced contributions from the bookstore to the university.