Economics and Usage of Digital Libraries: Byting the Bullet

6.1 Introduction

Electronic access to scholarly journals has become an important and commonly accepted tool for researchers. Technological improvements in, and decreased costs for, communication networks and digital hardware are inducing innovation in digital content publishing, distribution, access and usage. Consequently, although publishers and libraries face a number of challenges, they also have promising new opportunities. [1] Publishers are creating many new electronic-only journals on the Internet, while also developing and deploying electronic access to literature traditionally distributed on paper. They are modifying traditional pricing schemes and content bundles, and creating new schemes to take advantage of the characteristics of digital duplication and distribution.

The University of Michigan operated a field trial in electronic access pricing and bundling called "Pricing Electronic Access to Knowledge" (PEAK). We provided a host service providing access to roughly four and a half years of content (January 1995 - August 1999) including all of Elsevier Science's approximately 1200 scholarly journals. Participating institutions had access to this content for over 18 months. [2] Michigan provided Internet-based delivery to over 340,000 authorized users at twelve campuses and commercial research facilities across the U.S. The full content of the 1200 journals was received, catalogued and indexed, and delivered in real time. At the end of the project the database contained 849,371 articles, and of these 111,983 had been accessed at least once. Over $500,000 in electronic commerce was transacted during the experiment. For further details on this project, including the resources needed for implementation, see Bonn et al. (this volume).

We elsewhere describe the design and goals of the PEAK research project (MacKie-Mason and Riveros (2000)). In MacKie-Mason et al. (2000) we detail the pricing schemes offered to institutions and individual users. We also report and analyze usage statistics, including some data on the economic response of institutions and individuals to the different price and access options.

In this paper, we focus on an important behavior question: how much does usage respond to various differences in user cost? We pay careful attention to the effect of both pecuniary costs and non-pecuniary costs such as time and inconvenience.

An interesting aspect of the PEAK project is the role of the library as economic intermediary and the effects of its decisions on the costs faced by end users. [3] In the first stage of the decision process, the library makes access product purchasing decisions. These decisions then have a potentially large effect on the costs that users face in accessing particular electronic journal articles, whether it be the requirement that users obtain and use a password or pay a monetary cost. The consumer then decides whether she will pay these costs to access a given article.

The standard economic prediction is that a user will access an article if the marginal benefit she expects from the article (i.e. the incremental value) is greater than her marginal cost. Different users are going to have different valuations for electronic access to journal articles. Furthermore, even the same user will not place the same value on all requested articles. Information regarding users' sensitivity to user cost (known to economists as the elasticity of demand) for various articles is important to an institutional decision-maker who wants to maximize, or at least achieve a minimally acceptable level of user welfare. [4] Demand elasticity information is also vital to firms designing access options and systems because design decisions will affect non-pecuniary costs faced by the users, and thus overall demand for access.

It is well known that the usage of information resources responds to the monetary cost users bear. We find that even modest per article fees drastically suppressed usage. It is also true, but perhaps less appreciated, that non-pecuniary costs are important for the design of digital information access systems. We find that the number of screens users must navigate, and the amount of external information they must recall and provide (such as passwords), have a substantial impact on usage. We estimate the amount of demand that was choked off by successive increases in the user cost of access. Further, we find preliminary evidence that users were more likely to bear these costs when they are expected. Finally, given the access options and prices offered in the PEAK experiment, we calculate the least costly bundles of access options an institution could have purchased to meet the observed usage, and compare this to the actual bundles purchased in each year. From this comparison we learn about the nature of institutional forecasting errors, and the potential cost savings to them from the detailed usage information of the sort provided by PEAK.