Harry Potter and the Predatory Pricers

We all remember the craze that surrounded a Harry Potter book release.  Devoted fans would flock to stores at midnight on the release day and throw nerdy parties until they could get their hands on the latest fantasy novel.  What some might not remember are the economics that surrounded these events.

Harry Potter book releases were a great money making opportunity for any store that carried the books.  As long as customers knew they had the book, they would sell it and make a profit.  That is, until big chain stores started under-pricing their Harry Potter books.

Knowing that Harry Potter books represented a chance to draw a large number of customers, big stores such as Wal-Mart decided to sell the books below standard retail price, or below their seller's cost for the books.  This meant that they made a loss on the books, but it was made up for by the fact that customers who came for the books often bought other things too.  In short, putting a low price tag on Harry Potter books actually earned money for Wal-Mart.

However, Wal-Mart had inadvertantly engaged in predatory pricing.  Small book stores began to complain about the extremely low prices of Wal-Mart's Harry Potter books because they were unable to sell their books to customers who knew about the low prices at bigger stores.  Many of these small book stores were forced to lower their prices and sell their books at zero profit.  Harry Potter books had gone from a sure-fire money maker to a burden on small businesses.