Question

In many college towns, private independent bookstores typically locate on the periphery of the college campus. However, in some college towns, the university has used political power to restrict private bookstores near campus through community zoning laws. Use your knowledge of markets to predict the price and quality of service differences in the market for college textbooks under the two different market regimes.

Answer 1

The bookstore that is located in the periphery of the college campus would act as a monopoly. In such a case, prices will be higher and the quality of the product will be lower. The monopoly conditions lead to focus on revenue generation rather than quality of the product supplied.

On the other hand, the bookstores outside campus will be in position to act like this as they have a lot of competition to face. They would not charge a higher price and because of tough competition would provide good quality products so that the consumers are attracted towards them.