In 2008, Amazon the dominant online book retailer unveiled Kindle, an e-book reader called by many observers the "iPod of books" as it is likely to transform how people read books. E-book technology offers a third important channel for delivering books to consumers and possibly transforming the book industry. Two other major channels of delivering books to consumers have been available so far: purchasing physical books from physical bookstores, predominantly book-chains like Barnes-and-Noble, or purchasing physical books online, from online book retailers like Amazon. The main objective of this article is to analyze how e-book technology affects strategic interaction in the book markets and ultimately impact book sellers, publishers and consumers. Developing a stylized game-theoretic model based on product differentiation literature and information goods literature, we examine how entry of an e-book seller affects competitive interaction in the book market. Factors explored include the differentiation of sellers in the physical book market, consumers' preferences for e-books, and ownership of the e-book seller. Implications for managing in the book industry are discussed.
