Unexpectedly Intriguing!
May 7, 2007

Greg Mankiw's advertisement for his economics texts today provides a neat springboard to do one of our favorite things with his Principles of Economics: to compare its relative prices in different markets!

When we did this exercise back in December 2006, we found that UK-based buyers of Mankiw's 4th edition of his Principles of Economics text had a 4% discount compared to their US-based counterparts.

Shortly thereafter, we found that the comparative discount that UK buyers of Mankiw's text could obtain through purchasing it through the US-based Amazon.com disappeared, as the US price increased to eliminate the difference between the US price and the price available through the UK-based Amazon.co.uk.

This makes sense in economic theory, as the lower price of an identical product in a different market represented an arbitrage opportunity for UK buyers of Mankiw's book. The US price moved to a new equilibrium that effectively eliminated the difference in prices between the two markets, leading to the efficient result of one price for identical products, much as happens with the price of other commodities, such as oil.

So, let's now check in on today's state of affairs. First, we'll look at a screen shot of Mankiw's book on Amazon.co.uk:

Mankiw Principle of Economics 4th ed - Amazon.co.uk (UK)

Using XE.com's Universal Currency Converter, we find that the equivalent of Mankiw's 75.00 GBP price in the UK is 149.65 USD:

Mankiw Principles of Economics US Price to UK Price Conversion, 7 May 2007

Now, let's look at today's price of Mankiw's text on US-based Amazon.com: Mankiw Principles of Economics 4th ed - Amazon.com (US)

Here, we find that Mankiw's book is selling at 134.23 USD. Converting that price from USD to GBP:

At 67.28 GBP, UK-based buyers of Mankiw's book through the US-based Amazon.com would realize a savings of 10.72 GBP, or rather, 14.3% off the book's base price in the UK. What's more, even factoring in international shipping costs (approximately 6.98 GBP) and the 1.99 GBP sourcing fee, UK buyers would still come out ahead!

If you're in the UK, act now while "Madman" Mankiw's screaming buy lasts!

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