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D-Lib Magazine
February 2004

Volume 10 Number 2

ISSN 1082-9873

Fair Publisher Pricing, Confidentiality Clauses and a Proposal to Even the Economic Playing Field


Philip M. Davis
Cornell University Library
Cornell University

Red Line

(This Opinion piece presents the opinions of the author. It does not necessarily reflect the views of D-Lib Magazine, its publisher, the Corporation for National Research Initiatives, or its sponsor.)


Fair pricing1 requires transparency in the marketplace. The use of confidentiality clauses may result in higher prices for all library consumers. This opinion piece advocates for the construction of a publicly available, SPARC and ARL endorsed database through which libraries can share price and licensing details. This article is based on a plenary speech at the Charleston Conference on Collection Development, November 7, 2003.

Fairness is relative

Fairness is a universal trait among humans, irrespective of culture. What is "fair" does not always lead to rational human behavior, and behavioral economists have used a game to illustrate this point. In the "ultimatum game", two people are given a hundred dollars to share. Only one person (the proposer) decides on how the money should split (50/50, 70/30, etc.) and makes the other person (the recipient) a take-it-or-leave-it offer. If the recipient accepts, both the proposer and the recipient walk away with their share of the money. If the recipient rejects the proposer's offer, both walk away with nothing.

In theory, the recipient should rationally accept any amount of money—even a dollar is better than nothing—but in practice, this rarely happens. Most people would rather reject a bad deal than watch someone else walking away with more money. Essentially, people are willing to punish those who are acting unfairly, even when it may not bring them any direct benefit. This type of behavior is what economists call the principle of "strong reciprocity", and it makes markets work more fairly. In the ultimatum game, the proposer usually ends up offering something relatively close to an equal split to ensure that the recipient accepts.

Fairness requires market transparency

While humans may not necessarily exhibit rational behavior, they judge fairness in relative terms. What is "fair" to most players of the ultimatum game is that both participants walk away with equal sums of money. Now let's change the rules of the game. Suppose now that only the proposer knows how much money he has to share (he is keeping it all rolled up in his pocket and hidden from the receiver). The proposer reaches into his pocket and pulls out a sum of money (say a twenty dollar bill) in the same take-it-or-leave-it arrangement. The recipient does not know how much money the proposer has to share and may deem this as a "fair deal" and walk away with the $20.

From this model, one could argue that preventing librarians from sharing information on how much they paid for a certain product through confidentiality licensing practices protects everyone's sense of fairness—if you don't know that someone else got a better deal, and the publisher gave you the impression that you fought them every step of the way, you may believe that you got a fair deal; that is, of course, until you find out that someone got a better deal.

Market transparency leads to lower prices

In any consumer marketplace, access to information is very powerful in the decision-making process. Consider someone who wants to purchase a car. Car dealers are trying to secure the highest possible price, and consumers want to pay the lowest possible price. Information about the wholesale price, the list price, and what others have paid gives the customer a great deal of bargaining power in negotiating the final purchase price. [In the case of car prices, a non-profit group, Consumers Union, is responsible for collecting and disseminating wholesale price information]. As anyone will tell you, a consumer who has access to pricing information is at a distinct advantage over a consumer who does not.

The move from open pricing models to confidential ones should be disconcerting to those who believe that deals between the publisher and the library should be open and fair. Market transparency is a necessary condition for competition, and competition has a moderating effect on pricing. In recent years, prices and licensing details have become (in some cases) confidential matters between each library and the publisher. Based on market economics, individual institutions who cannot share information pricing and licensing with others put themselves (and all libraries) at a distinct disadvantage, and may end up paying more money than they would if they openly shared information. Confidentiality licensing only serves to pacify library consumers while transferring more negotiating power to the publisher.

Proposal to create an eResources Value Site

To return fairness back to the market, I propose the construction of a publicly available, distributed database where libraries are able to share with other libraries price, usage and other information about deals reached with publishers. I call this proposed database the eResources Value Site. Publishers are already knowledgeable about what individual institutions use and pay for a particular title or package. The creation of the eResource Value Site would provide a more level playing field for librarians. In essence, it would make any publisher pricing strategy more transparent.

Ideally, libraries or consortia participating in the eResources Value Site would provide:

  1. cost data
  2. usage data
  3. descriptive information about the institution or consortium (i.e., FTE and Carnegie Classification), and
  4. relevant access details that might affect pricing

Once a few libraries have participated by sharing their data and subscription costs, it wouldn't be difficult to have this eReources Value Site calculate, rank and present data based on several criteria such as cost per site, or cost per FTE. (Similarly, if consortia provided their cost and usage information, then deals involving individual consortia could be compared.) In addition, descriptive information about individual titles or products could be used as fixed variables (i.e., number of articles published in a given year).

Unlike other proposed solutions to regulate the marketplace, the model of sharing local data with other libraries does not require all libraries to collude and participate in this project—those libraries that for whatever reason choose not to contribute data would still be able to view the data other libraries contributed. Those institutions located in open-records states or that have not already signed confidentiality clauses are in an ideal position to provide the initial leadership for the eResources Value Site. Benefits to each library, and to libraries as a whole, could be achieved initially by just a handful of libraries contributing to the database.

Please note that I am not arguing for keeping track of all electronic resources, just those resources where a particular publisher insists on keeping its pricing model opaque and hidden from the public. These tend to be the same publishers with which librarians must engage in months of laborious negotiations when their contracts come up for renewal.

In summary, the open sharing of local cost and usage data would provide immediate and beneficial effects on the scholarly publication market. An open market for sharing price and licensing information puts the library in a much stronger position for negotiation than does a confidential and opaque market.

The proposed eResources Value Site could provide a prototype to test this idea. I believe that this proposal would work towards the mission of SPARC and ARL libraries. The eResources Value Site would be cheap and easy to build, and would not require all librarians to collude in order to benefit. While the ideal solution would be to work toward transparent pricing models for all publishers, this initiative may provide those publishers who insist on keeping their pricing models opaque from the consumer with an incentive to change.

[1] "Fair," in this article, is used in the sense of equitable. It is not claimed that there is one absolute, clearly understood price for a given journal.

Copyright © 2004 Philip M. Davis

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DOI: 10.1045/february2004-davis