Economic modeling: An aid to the pricing of information services

The pressures of limited budgets and of increased competition for use of funds are forcing information centers and libraries to initiate user fees. There have been, however, few precedents or guidelines to which the information service administrator might turn for assistance in formulating pricing policy. In this paper, components of the pricing decision are identified: the pricing objectives pursued, the pricing policies these aims are translated into, and the actual pricing methods employed in calculating what price to charge. A variety of pricing methods can be used to meet a given pricing objective, and several of these pricing practices are described using a basic classification scheme developed for the field of marketing: cost‐oriented, competition‐oriented, and demand‐oriented approaches to pricing. Costs represent a starting point for developing pricing structure, and cost‐oriented pricing techniques are taken up in detail. Cost functions are identified and their impact on price setting is suggested. Examples and data are provided from recent research into the pricing of computer‐assisted selective dissemination of information (SDI) services. The techniques of price discrimination, marginal cost pricing, and break‐even analysis are discussed. In making policy decisions, the need for accurate and complete cost data and demand information is emphasized, and several common approaches to estimating demand elasticity are suggested. The paper ends with a brief enumeration of sources of models to be explored for their applicability to the pricing of information services.