Walmart, Target, and Amazon drop book prices -- and distributors get spanked

When a price war erupted last month among Amazon (AMZN), Wal-Mart (WMT), and Target (TGT) on select anticipated blockbuster books -- new titles by Sarah Palin, James Patterson, Stephen King, and Barbara Kingsolver -- it seemed like independent bookstores would be taking a beating. But the real victims may turn out not to be those mom-and-pop shops but their wholesalers and distributors.

The big-box retailers have been playing a game of limbo this fall, pricing hardcover editions for as little as $8.98. It's textbook loss-leader economics, the theory being that pricing these few titles so low should entice customers to buy other products at full price.