Economics and Usage of Digital Libraries: Byting the Bullet

11.6 Conclusions

This chapter offers a new framework for understanding the interaction between libraries and commercial publishers. A portfolio approach to journal demand is proposed that is consistent with the observed pattern of journal purchases. This approach to demand can be used to explain for-profit publisher pricing as well as the incentives for mergers in this market. Estimation of a structural model of supply and demand reveals that the firm-level demand for journals is highly inelastic, that quality- and cost-adjusted price increases have been substantial over the past decade, and that past mergers have contributed to these price increases. Together these theoretical and empirical results raise a number of policy questions regarding (1) the performance of commercial publishers, (2) the efficacy of current antitrust paradigms and (3) the possibility that electronic distribution may mitigate existing problems in the market for scholarly journals.