Re: Price discrimination for academic subscriptions (discussion)

["Heather Morrison" <hmorrison@ola.bc.ca>]

Phil Davis wrote:

>Price discrimination, whereby customers pay different prices for the same
>product based on their willingness to pay, has been accepted in the
>academic journal market.  

[snip]

>I would like to submit for discussion is that these classifications are
>really just estimates of real (or potential) use.  In other words, we can
>map *willingness to pay* to *utility*.  Utility can therefore be reduced
>to something that can be counted, like *number of downloads*.

[snip]

As Phil & Rick Anderson have pointed out, it might be a good idea to
figure out what's meant by price discrimination, before we draw any
conclusions about whether or not it's desirable.

Phil suggests that price discrimination can be defined as "willingness to
pay".  I would agree that there is probably a close correlation between
the two; however, I don't think they are quite the same.

Price discrimination as "willingness to pay" makes the most sense in terms
of the strictly commercial, for-profit publisher, i.e. the idea of making
just as much money as one possibly can.  Even in this situation, there are
good reasons for considering factors other than just short-term profits;
for example, public relations and ensuring that, in the long term, the
business has a clientele that has the ability to use the product.  For
example, if the publisher is aiming to sell to the corporate sector, it is
in their advantage to provide attractive pricing to academic and school
libraries, so that clients will receive the education they need to find
the products useful after they graduate.  Then there are the many vendors
and publishers - commercial and not-for-profit - for whom profits are not
the only motive.  Capitalism and caring about people are not mutually
exclusive.

Aside from utility, another factor in *willingness to pay* is ability to
pay.  Some libraries, regions, and countries, are more affluent than
others.  Price discrimination in relation to this factor can mean things
like differential pricing based on a library's budget or its materials
budget, or the country's gross domestic product, or local currency
fluctuations.  This kind of price discrimination can be factored into
standard pricing, or it can be a factor in individual negotiations.  Many
vendors are practising price discrimination of this kind in one way or
another, and I believe this is generally a good thing.  For example, this
is the pricing model that allows for free access or very low pricing for
many people in the developing world for academic journals.  This pricing
model has also meant that some smaller and less affluent libraries in
North America have access to resources they would not otherwise have had
access to.

I don't think currency fluctuations are regularly factored into pricing,
but many libraries in many countries would be very appreciative if they
were!

On the other hand, pricing based on a library's budget or materials budget
is not entirely fair, as it puts institutions that choose to under-fund
libraries at an advantage.  It might be more fair to base this kind of
pricing on a combination of what ARL/ACRL standards indicate a library's
budget should be, and a factor related to the economic circumstances of
the region, to provide for libraries that are underfunded due to a genuine
lack of funds rather than choice.

I would agree with Phil's analysis that some forms of price discrimination
are based on estimates of utility.  Not too long ago, rsage was the
standard for pricing of electronic resources, i.e. connect charges,
per-download charges, based on the limitations of the technology at the
time.  There are also current examples of pricing based directly on usage,
for example document delivery services.

Some pricing models which appear to be designed to address "willingness to
pay" seem to have the potential to discourage usage:  for example,
simultaneous usage, geographic-based pricing (e.g. onsite usage only,
per-branch pricing, workstation-based pricing), or purchase for subsets of
users rather than the library's entire population.  (Note:  
geographic-based pricing is a term I just made up to gather together
several types of pricing that seem to me to be conceptually related.)

Simulteanous usage pricing has been a real boon for libraries and vendors,
when unlimited usage pricing results in prices far beyond a library's
willingness or ability to pay.  In my opinion, simultaneous usage is
likely to discourage use.  When a user is turned away, they may return
later - or decide to make use of other resources, such as whatever is
freely available on the internet, even if they would have been better off
being more persistent. with the resource they were turned away from.

Geographic-based pricing is similarly likely to discourage use - many
users will turn to what they have access to from where they are, even if a
resource available only onsite at the main branch would be better suited
for their needs.

Pricing based on subsets of users (e.g. number of academic biology
students) could be a good way to achieve fair pricing - or it could be a
serious threat to intellectual freedom, depending on whether the pricing
model is accompanied by restrictions on access.  That is, pricing based on
these kinds of numbers, but allowing for access to the whole academic
community (including walk-in users, of course!), can be a means of
achieving fairness in pricing, since very similar institutions FTE and
budget-wise, can have very different needs based on programming.  On the
other hand, if this pricing model comes with access restricted to the
subset of the total population only, the nature of the academic library
could very suddenly change.  For example, a print-based biology
collection, available to all with the decision about whether to make use
of it in the hands of the individual, could suddenly become a collection
limited to biology students and faculty only.

Another factor in price discrimination is type or purpose of library.  
For-profit corporate libraries tend to pay the highest prices; academic,
public, school and not-for-profit special libraries often enjoy lower
pricing.  In this case, there probably is a correlation between
willingness/ability to pay and purpose, however I understand that many
vendors are more willing to negotiate based on willingness to pay, when
profit is not the raison d'etre of the client.

hope this helps the discussion,

Heather Grace Morrison