Tuesday, March 6, 2012

The Economics of Arabian Nights: Forward

At first glance, the Forward to The Arabian Nights might seem irrelevant to our task at hand: To find and analyze the behavior of the characters from an economic perspective. However, this short introduction does provide some food for thought.

An author* generally operates in a monopolistic competitive market. The competitive part holds because, like in the perfectly competitive market, there are no or few barriers to entry. For example, in the United States, you don’t need a license or degree to legally conduct business as an author, unlike a taxicab driver or a physician. Anyone who gets an idea can write.

When there’s a lot of competition, each author has little market power or control over price. If one author’s book is significantly more expensive than a similar one by another author, then the first author will likely lose sales. However, there’s a way to prevent this from happening: creating an aura of having a monopoly.

“Branding,” or creating a unique product in the minds of consumers, will allow an author to exercise greater control over the price. His book might be more expensive, but his reputation as being an award-winning author or a celebrity endorsement will make it stand out from the rest. Like Pepsi and Coke, it doesn’t matter if his book really is better than a competitor’s, the author just hopes the public will think so.

So it should come as no surprise that the Forward to our text flatters the reader (“honorable gentlemen and noble readers” and “people of distinction”) and praises the author’s work (“this agreeable and entertaining book” and “splendid biographies”). The author is conducting a medieval ad campaign, hoping that it will set his work apart from the other books available.

Part of his success lies in his ability to create incentives for the public to read his book. He does this by appealing to both the practical and the pleasure-loving. He promises education and learning (“highly edifying histories and excellent lessons,” “opportunity to learn,” and “teaching [the reader] to detect deception and to protect himself from it”). Parents, seeing the opportunity to increase their children’s human capital (skills and education), would likely race to obtain the latest edition.

For those who don’t like spending their leisure time learning, however, the author promises quality entertainment (it will “delight and divert”). Real live people enjoy stories just as much as the fictitious characters, human and non-human, who narrate and listen in the book. And producing a good story has made the author’s work a continuing success.

Conclusion: To increase consumer loyalty and exercise some control over price, a producer must convince buyers of his product’s unique ability to satisfy their needs and wants.

*Since The Arabian Nights is a compilation of stories with different cultural origins that were woven together into the familiar tale we have today, “compiler” or “editor” (or the plural forms) might be more appropriate. For simplicity though, “author” will be used here.

Note: “The Economics of Arabian Nights: Forward” was originally posted as “Forward” on Monday, September 6, 2010 on The Economics of Arabian Nights, my economics blog that has now been discontinued, along with The Economics of Canterbury Tales. Both series will be continued here.