Well, it did not before March 2013. What changed things was a U.S. Supreme Court decision: Kirtsaeng v. John Wiley & Sons (henceforth Kirtsaeng). The decision is about the (geographical) interpretation of the "first sale" doctrine in U.S. copyright law. But let us just stick to the simple Economics. So how did things work prior to the decision ... say in 2012?
Suppose there are two countries - the U.S. (rich country) and Thailand (poor country). The publisher produces a book which is sold in the U.S and in Thailand (could be sold there through an Asian subsidiary and in fact could also be printed on lower quality paper ... but those are just details). Publishers practiced price discrimination. In simple terms, suppose the cost of production of a book is $10. The same product (book) is sold in the U.S. (rich country) for $100 and in Thailand (poor country) for $20. In order for price discrimination to be effective, the seller has to separate the two markets, or prevent resale from one market to another. The way publishers typically did this was to call the Thai product an 'International Students Edition' and often there would be a stamp or print on the cover which said something like "Not for sale in the United States".
If the seller is not able to separate markets then this sort of pricing creates and arbitrage opportunity - or an opportunity to make a 'sure' profit. Suppose transport costs (from Thailand to United States) per book are $5. I can buy the book in Thailand for $20 and ship it to the U.S. for another $5 - so the 'landed' price in the U.S. is $25. I could sell the book in the U.S. for anywhere between $25.01 and $99.99 and make a profit of anywhere between 1 cent and $74.99 per book. What a great business! Students in the U.S. would of course be happy because they can buy the book for less than $100 (the publisher's sales in the U.S. will decline, while sales in Thailand may increase, of course total profits will decline).
Well, that is exactly what Mr. Kirtsaeng did. He is from Thailand and when he was a mathematics student in the U.S., he imported books from Thailand and sold them in the U.S. (including on eBay). Some estimates suggest he made as much as $1 million doing this, where as others say that the numbers are exaggerated. In any case, sales were large enough to attract the attention of the publisher - John Wiley and Sons, who took him to court and won the initial few rounds in lower courts but lost in the Supreme Court.
So essentially in the Kirtsaeng decision - the Court says that Mr. Kirtsaeng is not breaking U.S. law. This is good news for U.S. students (in theory) because now we can all quit our jobs and drop out of school and set up a business - buy textbooks in poor countries and sell them to students in rich countries. The publishers (not just John Wiley, but all publishers including the one that publishes Mankiw's text - Cengage) are not happy. It is in their interest to stop the flow of books from poor countries to rich countries. So they decide to come up with a 'list price' which is valid in all markets (uniform pricing) - in the case of Mankiw's 6th edn. I was told the price was S$412.50. Of course this is a ridiculous price. But the point is to send a message that it is no longer profitable to buy books in poor countries and sell them in rich countries - kill the arbitrage opportunity. But of course what about sales at this exorbitant price? Unless the publishers are smoking exotic stuff, they cannot expect to sell any books at this price. So what do they do?
They say ... "and by the way your students can still get an online version of the book for about S$40. And guess what? We have a number of videos online and other goodies like self-tests (Aplia)." They are hoping of course that we will all be so relieved and say Thank God I am getting such a great deal! But really what they are doing is converting a good into a service. Goods can be shipped from one country to another or re-sold or rented, but services cannot. So turning a good into a service is an easy way to geographically segment markets and charge different prices in different markets ... and not have to worry about people like Mr. Kirtsaeng. I don't have any numbers on adoption of online (digital) versions of Mankiw, but only time will tell how things evolve.
Of course some of you may ask why the publisher is willing to provide physical versions of older editions (say the 5th) - well I understand that the 'list price' applies to books with copyrights in 2012, 2013 and 2014. The 5th edition is 2011.