Tbe adverse selection story, really a price discrimination story,
assumes monopoly power in the photography market. But there is free
entry into photography and hundreds of photographers easily available in
the phone book thus price should fall to MC which implies that
photographers should be willing to give up the negatives for a penny.
John-Charles's answer (keeping the negative is a form of quality
control necessary for the photographer to keep and maintain a good
reputation) is more promising. It could be the case that the cost of
the potential loss in reputation to the photographer is worth more than
the negatives to the buyer and thus no trade is made. The main question
I would have is whether quality of print versus quality of photograph is
that difficult to ascertain - but I'm willing to go with this for now.
JC's answer, by the way, is consistent with price being at marginal
cost. Thus an important test suggests itself - when the photographer
has your negative is price above marginal cost for developing a print -
i.e. is the price higher than if you had the negative and went
elsewhere? I had always assumed that it was but JCs answer suggests I
should investigate further.
Alex
--
Dr. Alexander Tabarrok
Vice President and Director of Research
The Independent Institute
100 Swan Way
Oakland, CA, 94621-1428
Tel. 510-632-1366, FAX: 510-568-6040
Email: [EMAIL PROTECTED]
