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    4.5 Pricing

    Pricing electronic access to scholarly information is far from being a well-understood problem. Contemporaneous with the PEAK experiment, Prior (1999) reported that, based on a survey of 37 publishers, when both print-on-paper and electronic versions were offered 62% of the publishers had a single combined price, with a surcharge over the paper subscription price of between 8% and 65%. The most common surcharge was between 15% and 20%. Half of the respondents offered electronic access separately at a price between 65% and 150% of print, most commonly between 90% and 100%. Fully 30% of the participating publishers changed their pricing policy in just one year (1999). In this section, we will describe the pricing structure we implemented in the PEAK experiment and our rationale for it.

    For content that can be delivered either on paper or electronically, there are three primary cost categories: content cost, paper delivery cost and electronic delivery costs. The price levels chosen for the experiment reflect the components of cost, adjusted downward for an overall discount to encourage participation in the experiment.[7]

    To recover the costs of constructing and operating the electronic delivery system, participating institutions paid the University of Michigan an individually negotiated institutional participation license (IPL) fee, roughly proportional to the number of authorized users. To account for the content cost, institutions or individual users paid the access prices associated with each product type described above (traditional subscriptions, generalized subscriptions, or individual articles)

    Arbitrage possibilities impose some constraints on the relative prices between access options. Arbitrage arises when users can choose different options to replicate the same access. For example, the PEAK price per article in a per-article purchase had to be greater than the price per article in a generalized subscription, and this price had to be greater than the price per article in a traditional subscription. These inequalities impose the restriction that the user could not save by replicating a traditional subscription through purchasing individual articles or a generalized subscription, nor save by replicating a generalized subscription by paying for individual articles. Alternatively, arbitrage constrains publishers to charge a price for bundles that is less than the sum of the individual component prices.

    The mapping of component costs to price levels is not exact, and in some cases the relationship is complicated. For example, although electronic delivery costs are essentially zero, there is some additional cost to creating the electronic versions of the content (especially at the time of the PEAK experiment because Elsevier's current production process was not fully unified for print and electronic publication). Therefore, the electronic access price might be set in a competitive market to recover both the content value and also some amount of incremental electronic delivery cost.

    Based on the considerations above, and on negotiations with the publisher, we set the following prices: per article at $7; generalized subscriptions at $548 for 120 articles; and traditional subscriptions at $4 per issue plus 10% of the paper subscription price. A substantial amount of material, including all content available that was published two calendar years prior, was available without any additional charge after an institution paid the IPL fee for the service. We refer to this as "unmetered". Full-length articles from the current two calendar years were "metered": users could access them only if the articles were paid for under a traditional or generalized subscription, or purchased on a per-article basis.