The Economics of Authors’ Royalty Contracts: Some Analytics

Abstract

This article examines the alleged conflict between authors and publishers whereby authors allegedly prefer a sales‐maximising price while publishers prefer a profit‐maximising price. It is shown that: (1) given some initial royalty rate proposal, there is limited scope for royalty rate changes which can make both parties better off by maximising profits‐plus‐royalties compared with profit or sales maximisation; (2) where publishers adopt a profit‐maximising price, there is an inverted‐U relationship between authors′ royalty receipts and the royalty rate with a consequent “maximal” rate; (3) appropriate demand and cost assumptions yield royalty rate predictions broadly in line with those observed, without assuming any bargaining bias in favour of the publisher.

Citation

Gemmell, N. (1989), "The Economics of Authors’ Royalty Contracts: Some Analytics", Journal of Economic Studies, Vol. 16 No. 4. https://doi.org/10.1108/EUM0000000000135