Economics and Usage of Digital Libraries: Byting the Bullet
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8.5 What do Average Prices Mean?
Prior to discussing reasons why journal prices have increased so much, it is worth noting that there are several ways in which one can measure average price. In the literature, average price is nearly always calculated as the average price per title. That is, the prices of a set of journals are summed and divided by the total number of journal titles in the set. This average has specific meaning. For example, it makes sense for an individual library to estimate the average price for their collection in this way, particularly for comparison over time. However, from a total systems perspective it makes more sense to measure average price by the price per subscription. That is, one takes the total price of all journals circulated and divides by the total circulation. This average price is much lower than the average price per title and has a much different meaning. The point can be made through a simple arithmetic example, taking into account that low circulation journals have higher prices due to relatively higher fixed costs. In 1995 we observed the following equal number of journals in four ranges of circulation (i.e., quartiles) and the average circulation observed in each quartile as shown in Table 8.2.[9] In the table we also present the price necessary to recover publishing costs at the average circulation and with the other characteristics and cost parameters mentioned in the previous section held constant.
| Circulation | No. of Journals | Avg. Circulation | Price |
| < 900 | 1,693 | 520 | $747 |
| 901 - 1,900 | 1,693 | 1,310 | $316 |
| 1,901 - 5,700 | 1,693 | 3,290 | $145 |
| > 5,700 | 1,693 | 18,100 | $53 |
| ALL | 6,772 | 5,805 | $315 |
Average price per journal can be roughly estimated by summing the four sets of prices of all journals in each quartile (e.g., $747 x 1,693) and dividing the total of the four quartiles by 6,772 journal titles (recognizing that this estimate is below the real average). As shown, the average cost/price per journal title is $315.
The average price per subscription is estimated by summing the four sets of prices of all subscriptions in each quartile (e.g., $747 x 1,693 x 520) and dividing the total of the four quartiles by the total number of subscriptions in 1995, which is about 39.3 million (i.e., 6,772 journal titles x 5,805 subscriptions per title). The average price per subscription is $96—far less than the price per journal title ($315). Thus, it is clear that the highly skewed distribution of journal circulation means that large circulation journals dominate average price calculated in this way. Yet this measure of average price is more meaningful when considering the impact of price on the U.S. economy or in terms of examining price trends to the entire scientific community, not just to individual libraries.
