Open Access News

Abstract: Digital-age technologies promise to revolutionize the market for academic journals as they have other forms of media. We model journals as intermediaries linking authors with readers in a two-sided market. We use the model to study the division of fees between authors and readers under various market structures, ranging from monopoly to free entry. The results help explain why print journals traditionally obtained most of their revenue from subscription fees. The results raise the possibility that digitization may lead to a proliferation of online journals targeting various author types. The paper contributes to the literature on two-sided markets in its analysis of free-entry equilibrium and modeling of product-quality certification.

From the body of the paper:

The key feature of the journals market captured in our framework is its “two-sided” nature. Subscribers on one side of the market benefit from the scholarship of authors on the other side. Conversely, authors benefit from having a large number of readers. Journals serve as intermediaries between the two sides. Drawing on the growing industrial-organization literature on two-sided markets, we develop a model tailored to the case of academic journals. We use the model to understand how the traditional structure of academic journal prices, with zero or low author fees on one side and high subscription fees on the other, might have arisen....We study the efficiency and competitive viability of a new model of journal pricing, open access, advocated by a growing number of scholars and librarians. The open-access model turns the traditional pricing model on its head, making articles freely available to readers over the Internet and deriving revenues instead from high author fees....

[Appendix B] provides empirical evidence supporting the assumption of that journals adjust their prices in the transition to long-run equilibrium, so that author prices will vary with the number of readers and reader prices will vary with the number of articles from year to year.

Comment. Like the Jeon/Rochet paper (blogged just before this one), McCabe and Snyder assume that all OA journals charge author-side fees when in fact most of them do not. I offer no judgment on how well their analysis applies to those that do charge fees.

Update. In correspondence with Mark, I've learned that his analysis does not assume that all OA journals charge author-side fees. (The claim in the introduction about OA journals and "high" author fees is most relevant for profit-maximizing firms; in the next revision of the paper they will clarify this point.) He and Snyder show that author-side fees can fluctuate down to zero, depending on other variables, and that one of the key variables is the availability of institutional subsidies.