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Pricing, Hunter, Davidson, Edelson, et. al.
- To: firstname.lastname@example.org
- Subject: Pricing, Hunter, Davidson, Edelson, et. al.
- From: mark mccabe <email@example.com>
- Date: Fri, 24 Sep 1999 00:02:20 EDT
- Reply-To: firstname.lastname@example.org
- Sender: email@example.com
Colleagues, I have been eavesdropping on the backbench of this electronic community for about 9 months. After reading the latest exchange about journal pricing I think it is time to make a small contribution. During the past year or so I have been privileged to speak at a number of librarian/publisher meetings, to meet many of the participants, and to listen to your expert opinions. I have learned a great deal. I have also spent much of this time developing and refining my analysis of journal pricing, a project first begun while I worked at the US DOJ's Antitrust Division. In particular, I have managed to construct a database that includes not only prices and journal characteristics but also actual circulation data (i.e. subscribers per journal for a random sample of libraries). I use this data to estimate what economists describe as a "structural" model of supply and demand, i.e. one that reflects the pricing behavior of firms. This model allows me to test whether firms enjoy market power, using some natural merger "experiments." The results (first reported at the Western Economic Meetings in San Diego this summer) suggest that, after one controls for quality, number of articles, differences in circulation, etc. firms such as Elsevier do wield considerable market power, and that recent mergers have raised prices considerably. Furthermore, even after accounting for these various factors, a substantial residual price inflation remains. What's going on? Although "expensive" journals may offer a high quality product, it seems clear that many commercial publishers are maximizing profits (short or long run profits?), given the type of demand they face. This demand for journals is highly inelastic (that is, large price increases result in relatively small changes in subscriptions). So yes, commercial publishers are apparently enjoying wonderful margins, but library demand is in part responsible, at least given present institutional arrangements. If you have some time (and patience for econo-speak) I encourage you to download my working paper (go to http://www.econ.gatech.edu/~mmccabe/journalWEA.pdf); I also understand that a short nontechnical update of this research will be published in the next issue of Against the Grain. If you'd like to obtain a copy of the latter, feel free to contact me. Thanks for your time. Mark McCabe Professor Mark J. McCabe School of Economics Georgia Institute of Technology 781 Marietta Street NW Atlanta, GA 30318 (V) 404 385 0512 (F) 404 894 1890 firstname.lastname@example.org <http://www.econ.gatech.edu/~mmccabe/index.html>