Have you noticed how expensive e-books are? There might be a good reason, according to the US Department of Justice: collusion to fix prices (via MA).
Penguin has settled with the Department of Justice in the e-book price-fixing case brought against Apple and five publishers this year. Three of the other publishers involved: Hachette, Simon & Schuster and HarperCollins — have already agreed to settle.
Penguin and Macmillan were holdouts, insisting that the case had no grounds. "We did not collude," said Macmillan CEO John Sargent in April, when the DOJ brought its case.
They may not have colluded, and unless there is "smoking gun"-type evidence, we may never know for sure. However we do know from all our theoretical models that if the e-book industry were competitive, prices would tend to reflect the costs of publication. But when e-book prices exceed the prices of paperbacks for the same titles, and when paperbacks are more costly to produce, it's an indication that competition is not driving prices down to even approximately reflect publication costs.
Higher prices for e-books probably reflects price discrimination across different consumers with different price elasticities of demand. But that type of price discrimination can occur only when there is a lack of competition.