pricing of academic journals

[odlyzko@dtc.umn.edu (Andrew Odlyzko)]

Readers of this list might possibly be interested in the following paper,
which uses evolution of pricing of academic journals to support a theory
of how pricing in general will be evolving, and why privacy is eroding.

Comments are invited.

Andrew Odlyzko

full paper URL:  http://www.dtc.umn.edu/~odlyzko/doc/privacy.economics.pdf

             Privacy, Economics, and Price Discrimination 
                       on the Internet

                       Andrew Odlyzko

                 Digital Technology Center
                  University of Minnesota
                  Minneapolis, Minnesota

                     odlyzko@umn.edu
              http://www.dtc.umn.edu/~odlyzko


                      Abstract:

The rapid erosion of privacy poses numerous puzzles.  Why is it occurring,
and why do people care about it?  This paper proposes an explanation for
many of these puzzles in terms of the increasing importance of price
discrimination.  Privacy appears to be declining largely in order to
facilitate differential pricing, which offers greater social and economic
gains than auctions or shopping agents.  The thesis of this paper is that
what really motivates commercial organizations (even though they often do
not realize it clearly themselves) is the growing incentive to price
discriminate, coupled with the increasing ability to price discriminate.  
It is the same incentive that has led to the airline yield management
system, with a complex and constantly changing array of prices.  It is
also the same incentive that led railroads to invent a variety of price
and quality differentiation schemes in the 19th century.  Privacy
intrusions serve to provide the information that allows sellers to
determine buyers' willingness to pay.  They also allow monitoring of
usage, to ensure that arbitrage is not used to bypass discriminatory
pricing.

Economically, price discrimination is usually regarded as desirable, since
it often increases the efficiency of the economy.  That is why it is
frequently promoted by governments, either through explicit mandates or
through indirect means.  On the other hand, price discrimination often
arouses strong opposition from the public.

There is no easy resolution to the conflict between sellers' incentives to
price discriminate and buyers' resistance to such measures. The continuing
tension between these two factors will have important consequences for the
nature of the economy.  It will also determine which technologies will be
adopted widely.  Governments will likely play an increasing role in
controlling pricing, although their roles will continue to be ambiguous.  
Sellers are likely to rely to an even greater extent on techniques such as
bundling that will allow them to extract more consumer surplus and also to
conceal the extent of price discrimination. Micropayments and auctions are
likely to play a smaller role than is often expected.  In general, because
of the strong conflicting influences, privacy is likely to prove an
intractable problem that will be prominent on the the public agenda for
the foreseeable future.

--