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    Empirical Models

    Previous empirical studies of journal pricing have not attempted to assess the extent of market power in the academic publishing market. Chressanthis and Chressanthis (1994) specified a reduced form hedonic model to study the determinants of pricing for economics journals. Their results suggest that prices are related to journal characteristics (e.g., as journal quality and size increase, so does price). Lieberman et al. (1992) estimated a supply and demand system using data for 225 ISI-ranked science journals. They find that supply is downward-sloping, consistent with the notion that publishing is characterized by scale economies at the individual title level. Based on this evidence they indirectly argue that entry by new titles has lowered circulation for existing journals, forcing the latter to raise prices to cover fixed costs. However, their model is unable to explain a significant portion of the observed price increases.

    Results for two empirical models are reported here. First, to test whether libraries' acquisition strategies reflect a ranking of journals according to cost/use values, I estimated an exponential cumulative distribution function (cdf).[11] The expectation is that cost per use and journal demand are inversely related. Confirmation of this hypothesis provides support for the portfolio approach to demand.

    Second, I estimated a structural two-equation model of supply and demand that measures firm-specific demand elasticities and explicitly accounts for the possibility of increased market power due to past mergers. Recall that inelastic demand is a necessary condition for the exercise of market power by publishers. Evidence of merger-related price increases is consistent with a portfolio market definition as well as the type of strategic behavior implied by the pricing model.