Re: Secret pricing (RE: Response from Ted Bergstrom to Ann Okerson)

[Phil Davis <pmd8@cornell.edu>]

Rick Anderson wrote: "Which, if you think about it [confidential pricing],
is really pretty silly."

Not really.  Confidential pricing allows for price discrimination to take
place (the charging of different prices to different customers based on
their ability or willingness to pay).  Price discrimination is practiced
because it leads to a more efficient market and greater profits to the
producer than charging a uniform price to all customers.  It is normally
practiced in markets where the producer has some monopoly power, which
means that the customer cannot substitute one product or service for
another.

To answer Rick's question, how would Library A be lead to believe that it
was getting a better deal than everyone else under the cloak of price
confidentiality?  The answer is *discounting*.  In most states, hotels are
required to post daily rate on the back of your hotel room door.  This is
"list price" and no one ever pays it.  Everyone always pays a much reduced
price, and because you don't know what the person in the next room paid,
you come to the conclusion that your bargain $99/night room was a great
deal, as long as you don't find out that the guy next door was charged
$69/night.

In the same way, most of the big publishers set "list prices" for their
journals, and almost no libraries ever pay that price.  Anyone who has
been involved in negotiating for serials packages also knows that the
first deal on the table proposed by publishers is never the one that is
accepted.  In sum, Rick's hypothetical scenario where everyone believes
they are getting a good deal in world of confidential pricing is achieved
by a combination of price discrimination and discounting.

--Phil Davis

At 05:50 PM 11/9/2005, you wrote:
> > In the same way, librarians are reluctant to share pricing information
> > (and willfully accept confidentiality clauses) if they believe if they
> > are getting a "good deal" from the publishers.
>
> Which, if you think about it, is really pretty silly.  If we all agree to
> keep our pricing secret, how does any individual library know that it's
> getting a better-than-average deal?  It seems equally likely that you're
> getting a worse-than-average deal.  After all, everyone can't get a better
> deal than everyone else; if Library A is getting an artificially low
> price, then somewhere there's a Library B whose price is higher than it
> would have been if the pricing were standardized and publicly known.
> Sales reps want us all to think that we're the Library A, of course -- but
> if prices are secret, we have no way of knowing that we're not actually
> the Library B.
>
> ----
> Rick Anderson
> Dir. of Resource Acquisition
> University of Nevada, Reno Libraries
> rickand@unr.edu