Problems of Definition: Elsevier’s Prices

The recent boycott of Elsevier provides us with a great quote for use in a statistical literacy class. People are boycotting for a number of reasons, particularly because of the high cost of the “bundles” Elsevier sells.

Claiming that their journals are some of the cheapest in the industry, an Elsevier rep states:

“Over the past 10 years, our prices have been in the lowest quartile in the publishing industry,” said Alicia Wise, Elsevier’s director of universal access. “Last year our prices were lower than our competitors’. I’m not sure why we are the focus of this boycott, but I’m very concerned about one dissatisfied scientist, and I’m concerned about 2,000.”

Form the perspective of definition of terms, this may initially seem pretty straightforward, but it’s anything but. What does “our prices” mean?

  • Mean or median price computed by total offerings? In which case Elsevier could offer hundreds of free and worthless journals that no one uses or orders individually. This would pretty handily offset higher priced offerings.
  • Mean or median price computed by individual sales? This would be a good measure — because it only counts the journals people use, and doesn’t count the junk they carry. But it is impossible to compute this number this way because of their practice of bundling.

This last point is pretty important. Imagine you have two cable companies. One charges you for only the channels you want, ala carte. You get BBC America, SyFy, and PBS for $12.

The other cable company makes you buy a package to get these channels, and it cleverly organizes it so no cheaper package includes all three of these. So you get your BBC America, SyFy, and PBS, but you have to buy the Super-Mega Package to get them. You therefore get 120 channels for $120.

Which cable company offers channels for the cheapest price? From your perspective you are getting charged $4 a channel by Company A, and $40 a channel by company B.

But since that information (what you were actuallytrying to order) is recorded nowhere, any public number is more likely going to be a function of the price you paid divided by the channels you bought. In this case Company A is charging you $4 a channel, whereas Company B is charging you $1 a channel. Company B (the grifters) are the cheapest.

What’s the point? Having the “lowest” prices in this case is a symptom of the bundling problem, not an excuse for it. The fact that Elsevier’s prices are in the lowest quartile is most likely a sign of excessive bundling, not of a functional market.

Possibly worth some class time on the cable TV example.

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