Tbe adverse selection story, really a price discrimination story, assumes monopoly power in the photography market. But there is free entry into photography and hundreds of photographers easily available in the phone book thus price should fall to MC which implies that photographers should be willing to give up the negatives for a penny.
John-Charles's answer (keeping the negative is a form of quality control necessary for the photographer to keep and maintain a good reputation) is more promising. It could be the case that the cost of the potential loss in reputation to the photographer is worth more than the negatives to the buyer and thus no trade is made. The main question I would have is whether quality of print versus quality of photograph is that difficult to ascertain - but I'm willing to go with this for now. JC's answer, by the way, is consistent with price being at marginal cost. Thus an important test suggests itself - when the photographer has your negative is price above marginal cost for developing a print - i.e. is the price higher than if you had the negative and went elsewhere? I had always assumed that it was but JCs answer suggests I should investigate further. Alex -- Dr. Alexander Tabarrok Vice President and Director of Research The Independent Institute 100 Swan Way Oakland, CA, 94621-1428 Tel. 510-632-1366, FAX: 510-568-6040 Email: [EMAIL PROTECTED]