A Test of the Coase Conjecture Using Prices of Electronic Books

ABSTRACT The Coase Conjecture predicts that a durable‐goods monopolist without commitment will rapidly cut price toward marginal cost. We test this prediction in the electronic‐book market using release‐day prices. To proxy for marginal cost, we use competitive prices of public‐domain electronic books on the same platforms. Release‐day prices for copyrighted electronic books are far above this cost benchmark—typically more than 30 times higher—and prices remain largely flat over the first month. Sales also persist well beyond release, contradicting immediate market clearing. These patterns are hard to reconcile with standard no‐commitment models but are consistent with models featuring commitment to future prices and with outside‐option models.