TY - JOUR AU - Chevalier,Judith AU - Goolsbee,Austan TI - Are Durable Goods Consumers Forward Looking? Evidence from College Textbooks JF - National Bureau of Economic Research Working Paper Series VL - No. 11421 PY - 2005 Y2 - June 2005 UR - http://www.nber.org/papers/w11421 L1 - http://www.nber.org/papers/w11421.pdf N1 - Author contact info: Judith A. Chevalier Yale School of Management 135 Prospect Street New Haven, CT 06520 Tel: 203/432-3122 Fax: NA E-Mail: judith.chevalier@yale.edu Austan Goolsbee Booth School of Business University of Chicago 5807 S. Woodlawn Avenue Chicago, IL 60637 Tel: 773/702-5869 Fax: 773/702-0458 E-Mail: goolsbee@chicagobooth.edu M2 - featured in NBER digest on 2006-02-01 AB - Popular wisdom holds that publishers revise college textbooks mainly to kill off the secondary market for used books. While this behavior might be profitable if consumers are myopic, uninformed or have high short-run discount rates (that exceed the publishers'), neoclassical authors have noted that it will typically not be profitable if publishers can precommit not to cut prices and if consumers are forward-looking and have similar discount rates as the publishers; the consumer's willingness to pay for new books falls if they know that they cannot resell their used books. Using a large new dataset on all textbooks sold in psychology, biology and economics in the 10 semesters from 1997 to 2001, we estimate a demand system for books to test whether textbook consumers are forward-looking. The data strongly support the view that students are forward-looking with low short-run discount rates and that they have rational expectations of publishers' revision behavior. When the students buy their textbooks, they correctly take into account the probability that they will not be able to resell their books at the end of the semester due to a new edition release. Conditional on faculty assignment behavior, simulation results suggest that students are sufficiently forward-looking that publishers could not raise revenues by accelerating current revision cycles. ER -