Rents

In addition to limiting the number of journals it produces, the American Economic Association differs from many publishers by emphasizing low cost. The price of its journals is less than half the industry average for economics journals, and the differential between library and individual rates is low.^[24] If the AEA's goal were to maximize profit, it could charge authors more, charge members and libraries more, make more revenue from its meetings, and launch more products to take advantage of its reputation by extending its scope. The rents available in this marketplace are then left to the authors, members, libraries, and competing publishers. The AEA is not maximizing its institutional rents.

Other nonprofit publishers may seek higher revenues to capture more of the available rents and use the proceeds to generate more products and association services. Lobbying activities, professional certification and accreditation, more meetings, and more journals are common among professional societies.

Many for-profit publishers seek to maximize the rents they can extract from the marketplace for the benefit of their shareholders. In considering how to package and price electronic products, the for-profit publishers will continue to be concerned with finding and exploiting the available rents. The profit-maximizing price for a journal is determined by the price elasticity of demand for the title and the marginal cost of producing it. With convenient network access, there may be an increase in demand that would allow a higher price, other things being equal. How the price elasticity of demand might change with network access is unknown. The fall in marginal cost with electronic distribution need not lead to a lower price.

One might then ask how a shift to electronic publishing may affect the size of the rents and their distribution. A shift to the database as the optimal size package with falling marginal costs would seem both to increase the size of potential rents and to make easier their exploitation for profit. Suppose control of a powerful working paper service gives a significant cost advantage to journal publishers. Suppose further that academic institutions find major advantages in subscribing to large databases of information rather than making decisions about individual journal titles. The enterprise that controls the working paper service and the database of journals may then have considerable rent-capturing ability. The price elas-

ticities of demand for such large packages may be low and the substitutes poor, and so the markups over costs may be substantial. The possibility of a significant pay-per-look market with high price elasticity of demand might cause the profit-maximizing price to be lower. The possibility of self-publication at personal or small-scale Web sites offers a poor substitute to integration in a database because Web search engines are unlike to point to those sites appropriately.