Consumer Surplus from Harry Potter

Last week, rather than wait a week for our household copy to free up, I bought a second copy of Harry Potter and the Deathly Hallows. I have read it and can confirm that it was worth every cent of the $27.95 I paid for it. Indeed, I can go further. I think that this book may have generated the highest consumer surplus of anything I have ever purchased. I base this on the fact that I couldn’t wait a week.

Here is how I calculate it. Let’s suppose that my weekly interest rate is a somewhat heroic 0.5% (that is probably excessively high). Then using the fact that I was willing to pay $27.95 not to wait a week, the intrinsic value that I must place on the book must be greater than $5,617.95. (with a, potentially quite reasonable, 0.1% weekly interest rate that rises to $27,977.95).

What this means is that had, alternatively, JK Rowling come to me and said that unless I paid her $3,000, I would never get to read the last book I would have happily taken that deal. Given that she only came up with $27.95 meant that I was left with a massive amount of surplus.

In reality, she wasn’t pricing for me but there is good reason to believe that she wasn’t pricing for anyone else either. After all, the book prices have been, if anything, declining in real terms over the last decade. A shrewd seller would have sold the first few cheaply and ramped up the prices later on.

One thought on “Consumer Surplus from Harry Potter”

  1. One thing you’re not factoring in (I think) is that the timing of the purchase is not just a matter of being willing to ‘wait a week.’ Buying immediately is important if you (a) want to avoid net spoilers, though even then there are risks given the leaks; and (b) want to participate in the early discussions of the merits of the book. It’s those things that led me to pay my $24.95 – I was willing to wait a few hours to save $5 by going to Big W rather than my local bookshop – rather than wait a week and borrow one of your two copies.

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