Definition of "price discrimination" (RE: Price discrimination for academic subscriptions (discussion)

["Rick Anderson" <rickand@unr.edu>]

I think this whole discussion has been based on an incorrect understanding
of the term "price discrimination."  As I understand it (economists,
please correct me as necessary), if a publisher charges a small college
$10 for a book and charges a large university $50 for the same book, that
is price discrimination, because both customers are getting the exact same
product or service but paying different prices (presumably based on their
differing "willingness to pay").  However, when a database provider
charges a small college $100 and a large university $500 for a year's
access, the situation is different.  Assuming that the larger university
will put more strain on the resource provided, the two institutions are in
fact getting different products -- or different amounts of the same
product.  It's true that we can't usually know for certain whether the
difference in consumption will be proportional to the difference in
institution size and price, but there is usually some effort to make the
two differences proportional, and to the extent that that effort is made,
"price discrimination" is not what's happening.

At one point Phil asserted that the marginal cost to a provider of
providing one more article download is close to zero, and that's certainly
true -- but if you're talking about tens of thousands of downloads (as
many database providers are), then a marginal cost of close to zero
quickly adds up to something substantially more than zero.  It's not price
discrimination to charge a customer more based on the reasonable
expectation that the customer is going to require more service.

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Rick Anderson
Director of Resource Acquisition
University of Nevada, Reno Libraries
(775) 784-6500 x273
rickand@unr.edu