@article{56fb3dd6cc964c57b0480f1583195d38,
title = "Digitization, prediction, and market efficiency: evidence from book publishing deals",
abstract = "Digitization has given creators direct access to consumers as well as a plethora of new data for suppliers of new products to draw on. We study how this affects market efficiency in the context of book publishing. Using data on about 50,000 license deals over more than 10 years, we identify the effects of digitization from quasi-experimental variation across book types. Consistent with digitization generating additional information for predicting product appeal, we show that the size of license payments more accurately reflects a product{\textquoteright}s ex post success, and more so for publishers that invest more in data analytics. These effects cannot be fully explained by changes in bargaining power or in demand. We estimate that efficiency gains are worth between 10% and 18% of publishers{\textquoteright} total investments in book deals. Thus, digitization can have large impacts on the allocation of resources across products of varying qualities in markets in which product appeal has traditionally been difficult to predict ex ante.",
keywords = "Book publishing, Digitization, Licensing markets, Prediction",
author = "Christian Peukert and Imke Reimers",
note = "Funding Information: History: Accepted by Joshua Gans, business strategy. Funding: C. Peukert acknowledges support from FCT-Portuguese Foundation of Science and Technolo-gy [FCT-PTDC/EGE-OGE/27968/2017] and from the Swiss National Science Foundation [100013_197807]. Supplemental Material: Data is available at https://doi.org/10.1287/mnsc.2021.4237. Funding Information: C. Peukert acknowledges support from FCT-Portuguese Foundation of Science and Technology [FCT-PTDC/EGE-OGE/27968/2017] and from the Swiss National Science Foundation [100013_197807]. The authors thank James Dana and Joel Waldfogel for valuable comments. The authors are grateful to Ilia Azizi and Farzaneh Nekui for excellent research assistance. The paper has benefited from the feedback of participants at Florence Media Workshop, the International Industrial Organization Conference Southern Economic Association Annual Meeting, the Paris Conference on Digital Economics, the SEARLE Conference on Internet Commerce and Innovation, the Mannheim Centre for European Economic Research (ZEW) Conference on the Economics of Information and Communication Technologies, CESifo Economics of Digitization Conference, Toulouse Digital Economics Conference, NBER Digitization Winter Meeting, and seminars at Northeastern, the Dartmouth Winter Industrial Organization Workshop, Ludwig Maximilian University Munich, the National Bureau of Economic Research Productivity Seminar, University of Melbourne, Digital Economy Workshop Lisbon, University of Zurich, University of Glasgow, University of Minnesota, Wake Forest University, and Harvard Business School. Publisher Copyright: {\textcopyright} 2022 INFORMS.",
year = "2022",
month = sep,
doi = "10.1287/mnsc.2021.4237",
language = "English",
volume = "68",
pages = "6907--6924",
journal = "Management Science",
issn = "0025-1909",
publisher = "INFORMS Institute for Operations Research and the Management Sciences",
number = "9",
}