Price discrimination: individual versus aggregate

[Heather Morrison <heatherm@eln.bc.ca>]

One of the little ironies about the electronic era is that it creates a
situation where a single price can be both impossibly low and ludicrously
high.

For example, imagine selling an aggregated database of several hundred
magazines to individual customers at $10 per year.  It's hard to imagine
how a price like that could recoup the costs needed for administration,
never mind product costs!

Imagine selling that same database to a public library for a city of
500,000 people at $10 per person per year.  This would mean a price of
$5,000,000 per year.  This would be a ludicrous price; not only completely
out of the range of any customer of that size, but if it were not, it
would yield so much revenue that it would be sure to attractive
competitors (who would have no difficulty whatsoever undercutting your
price).  Even assuming that only a small percentage of the total
population will use the product, as is customary when pricing for the
public library market, say 2% - the price according to this model would be
$100,000 per year.

For vendors of commercial products - magazines, and so forth - please note
that this price is truly ludicrous, not just a little high.  Depending on
the value of such a database, a price range of perhaps $5 - $10,000 per
year, in some cases less, would be more realistic.

Thus, a single price when applied to an individual customer can be
impossibly low, while the same price applied to an aggregate customer is
impossibly high.

To me, this illustrates the efficiency of the aggregated approach:  
whether it's the individual library as opposed to the individual customer,
the library consortium rather than the individual library, groups of
library consortia, or, on a global level:  everyone.  At the ultimate
aggregated level - everyone - it makes no difference at all whether the
funding is a purchase or funding for production.

Are there more than two roads to open access?  Perhaps all roads lead to
open access...

Apologies for temporal disconnect - this message belongs with last year's
thread on price discrimination.

cheers,

Heather G. Morrison
Project Coordinator
BC Electronic Library Network
~~~~~~~~~~~~~~~~~~~~
Phone: 604-268-7001
Fax: 604-291-3023
Email:  heatherm@eln.bc.ca
Web: http://www.eln.bc.ca