Earlier quoted context omitted.
The standard monopsony effect is on quality. Monopsonies push the price below the cost of production, so producers cut production costs to an unreasonable level. In the case of books, you'd see that by cuts in editing, by authors shortening the amount of time that they spend writing a book, and through authors dropping out and leaving the field to less talented writers with fewer alternative income sources. The textb…
Except Amazon is arguing for a lower price because it will increase sales and make both Amazon and the publisher more money. They aren't asking for more books or less editing. They're trying to make everyone more money. Worse, the argument is over pricing on e-books, not physical stock, so Hachette's stance makes even less sense. As usual, Paul Krugman sees everything through a political lens, so naturally Amazon is…
If the lower price really would make more money for everyone, then surely Hachette would readily do it. Since they don't, and since they understand this market as well as anyone, a reasonable person might assume that they would indeed make less money with a lower price.
Even free-market fundamentalists must see that free markets don't function when dominated by monopoly or monopsony. So isn't there a legitimate public policy question about whether the state should limit that market power?