Will Open Access Compete Away Monopoly Profits in Journal Publishing?

Publishers of scholarly journals currently obtain most of their revenue from subscription fees charged to libraries and individual users. We call this the " reader-pays " pricing model. An alternative pricing method has recently emerged, in which publishers collect their revenue by charging significant publication fees to authors, and then supply their content over the internet, at no cost to readers. We call this the " author-pays " pricing model. Open access, author-pays publishing is relatively new and has only become feasible because of the recent development of the internet, which reduces the marginal cost of extending access to almost zero. For reader-pays publishing, there is abundant data on price and quality of journals. For the nascent author-pays model, not much historical information is available and the academic world has not yet had time to fully adapt to the technological capabilities of the internet. In order to make some predictions about the eventual shape of the academic publishing market, it is useful to think about the economic fundamentals of this industry and their likely effects. We begin by noticing an unusual feature of the market for scientific publications. In most commodity markets, payments and resources flow in opposite directions. For example, the flows in the automobile market could be diagrammed as follows: Steel Cars −→ −→ Steelmakers Car manufacturers Consumers ←− ←− $ $ In the academic journal market, the direction of cash flows is different. 1 The middlemen, publishers, receive payments from consumers (readers) and also from suppliers (authors). Most journals charge subscription fees to readers. Many also charge page fees to authors and most maintain an implicit requirement that those who publish are obliged to donate refereeing services.