Bundling Electronic Journals and Competition among Publishers

Abstract

Site licensing of electronic journals has been revolutionizing the way academic information is distributed. However, many librarians are concerned about the possibility that commercial publishers might abuse site licensing by practicing bundling. In this paper, we analyze how bundling afects journal pricing in the market of scientific, technical and medical (STM) electronic journals and offer a novel insight on the bundling of a large number of information goods. We find that (i) when bundling is prohibited, surprisingly, industry concentration does not affect prices (ii) when bundling is allowed, each publisher finds bundling profitable and bundling increases industry profits while reducing social welfare and (iii) any merger among publishers already active in the market is profitable but reduces social welfare.