On the optimal provision of journals qua sometimes shared goods.

Abstract

There are many interesting and important policy issues surrounding the provision of technical journals that arise from the simple fact that journals are sometimes shared goods:' that is, they are shared goods when offered to the reading public through libraries and are, at the same time, private goods to personal subscribers. It is said, for example, that publishers are experiencing increasing difficulty in recovering their copy costs (setup costs) due to the rapid growth of reprography of library journals. Recognition of this new problem has led to intense public debate over copyright protection against uncompensated private dissemination of reproduced library materials.) There is a related accelerating trend towards the establishment of a dual pricing structure by publishers high rates for library subscriptions and lower rates for personal ones. This paper shows that these policy issues can only be understood by viewing journals as sometimes shared goods. We provide a theoretical framework for the analysis of the optimal provision of such commodities. We then apply it to questions of journal subscription pricing and library usage fees.3 The theoretical framework is based on the simultaneous existence of separate but linked markets for private and shared use of the good. The private market serves those consumers who value the good above its price and who either have no access to a shared unit or who choose not to share the good because the cost saving to them is outweighed by the inconvenience. The users of shared units also fall into two groups. The first group is comprised of those who would not purchase a unit of the good for themselves even if the sharing option were not available to them. The second is the group of users of shared units of the good who would switch to private consumption if their sharing option were foreclosed. The sharing option enables the former group to enjoy services they otherwise would not, while it benefits the latter group by reducing their expenditures on the commodity.4 We establish that the critical linkage between markets for private and shared use of *New York University and Bell Laboratories, and Bell Laboratories and Princeton University, respectively. We would like to thank George Borts and the referee for helpful comments. Ordovers's research was funded in part by a grant from the division of Science Information of the National Science Foundation. IWe detine a unit of a good as shared when its services are utilized by more than one agent, in contrast to a private unit of a good which is utilized by only one agent. A commodity is a sometimes shared good, by our definition, if some units are shared and others are private. In our paper (1977b), we provide an economic analysis of the factors that determine whether a commodity will be utilized exclusively as a private good, exclusively as a shared good, or, lastly, as a sometimes shared good. A contrasting analysis of journals by Yoram Barzel rests oii the public goods properties of the information disseminated in journals, while it ignores the public nature of library journal collections. 2This debate was stimulated by the celebrated case of Williams and Wilkins Co. vs. the United States. Summaries of various arguments and positions can be found in U.S. Senate Hearings on S. 1361. 3Questions pertaining to the choice of profit and welfare optimal subscription modes are discussed in Section IV of the authors ( 1977a). 4Users of shared units will. on average, have lower income than buyers of private units inasmuch as income is positively correlated with the inconvenience of shared use. To this extent, it can be said that the purpose of sharing options is to benefit lower income groups. In our welfare analysis below, we do not, however, place special weight on the benetits accruing to lower income consumers. Neither do we consider any external benefits from the shared use of the commodity by those who could not afford private purchase (see the authors, 1976, for a discussion of optimal allocation when goods have both private and external benefits). Consequently, we are, perhaps, abstracting from major reasons for public support of options for shared use.

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