Price Discrimination in the Subscription Market for Economics Journals

[Author Affiliation]Yuqing Zheng, , , , yuqzheng@rti.orgHarry M Kaiser, , , , hmk2@cornell.edu[Acknowledgment]This research was conducted when Dr. Zheng was working as a Research Associate at the Dyson School of Applied Economics and Management of Cornell University.1. IntroductionMost scientific journals charge a higher subscription price to institutional subscribers and a lower subscription price to individual subscribers. Such practice is often considered an issue of third-degree price discrimination in the economics and library literature (e.g., Liebowitz 1985; Phillips and Phillips 2002).1 This article examines what factors affect the degree of price discrimination for an academic journal by analyzing data on 190 of the 208 economics journals indexed in the 2008 edition of Journal Citation Reports compiled by the Institute for Scientific Information (JCR economics journals hereafter).2 The empirical literature on price discrimination in the market for journals is very limited. We attempt to enrich this existing literature by providing insights primarily in the following three aspects--price discrimination by journal governance (for-profit vs. nonprofit status), by publisher, and by how the differences in journal pricing behavior in the respective library and individual markets lead to various degrees of price discrimination.First, it is well known that for-profit journals (FP journals) often charge significantly higher library subscription prices than do comparable nonprofit journals (NFP journals). Many studies have reported a price premium charged by FP journals (e.g., Bergstrom's [2001] study on economics journals and the study conducted by Dewatripont et al. [2007] on 22 fields of natural and social sciences). What is less known is whether a FP journal is more discriminatory than a NFP journal. That is, the ratio of the price charged to libraries over that charged to individuals (the library-to-individual price ratio henceforth) could be higher for a FP journal than for a comparable NFP journal.Take the JCR economics journals in our data as an example. We plot in Figures 1 and 2 a journal's library-to-individual price ratio against its impact factor, with Figure 1 representing FP journals and Figure 2 representing NFP journals. For the 105 FP journals in our sample, the average library-to-individual price ratio is 8.16. With a price ratio of 34.58, the champion goes to the Journal of Economic Theory. For the 85 NFP journals in the data, the average and maximum library-to-individual price ratios are 4.13 and 14.03, respectively, with the latter belonging to Fiscal Studies. In this article, after controlling for other factors affecting pricing behavior by publishers, we examine whether the degree of price discrimination differs depending on whether a journal is FP or NFP, as suggested in the two figures. Our results indicate that FP journals are more discriminatory indeed.Figure 1The Library-to-Individual Price Ratios for For-Profit Journals (n = 105) (Figure omitted. See article image.)Figure 2The Library-to-Individual Price Ratios for Nonprofit Journals (n = 85) (Figure omitted. See article image.)Second, we identify publisher heterogeneity in engaging in price discrimination, which is informative to the library and academic communities but not known in the literature. For JCR economics journals, the major publishers include the four major commercial publishers--Elsevier, Wiley-Blackwell, Springer, and Taylor & Francis (including Routledge), as well as various university presses, and associations/societies. We allow for publisher conduct heterogeneity in conducting price discrimination and find that Elsevier is the most discriminatory publisher among all groups, followed by Wiley-Blackwell.Third, in addition to the library-to-individual price ratio, the library price and individual price are estimated, respectively. …