Detail

University libraries are expected by faculty and graduate students to carry the important if not all the technical journals that are relevant to their fields. Indeed, the quality and depth of the library may significantly affect a university's ranking and its ability to attract well known scholars and promising graduate students, which in turn affects its ability to attract research grants and donations. For these reasons a university library's demand for technical journals may be very inelastic. They have little choice but to subscribe to most such journals.

Because libraries must subscribe to these journals, individual professors, grad students, scientists, and others tend to have a relatively elastic demand for these publications.. after all they can go to the library (or if a professor they can have a grad student photocopy articles of interest :).

These differences in elasticity plus the relative ease of preventing resale generates an ideal environment for price discrimination.

12. Publishing companies typically charge libraries higher subscription rates than individuals for technical journals. (By technical journals we mean publications where articles are written by experts in a field for other experts such as the New England Journal of Medicine or Molecular Biology or the Journal of Public Economics. It is not uncommon to find that rates charged to libraries are 5 or 10 times or even more above those charged to individuals. The best explanation for the ability of the firms to do this is that:

libraries have more inelastic demands for technical journals that individuals so the publishers are able to engage in price discrimination.
individuals need the journals more so the publishers gives them a break. While this would be lovely if true, profit maximization hardly works this way and its not the case that individuals need them more.
libraries have more elastic demands for technical journals that individuals so the publishers are able to engage in price discrimination. As we noted above, libraries have much more inelastic demand and the facts presented in the question support this. If library demand were more elastic individuals would pay the higher prices.
individuals have more inelastic demands for technical journals so the publishers are able to engage in price discrimination. As we noted above, libraries have much more inelastic demand and the facts presented in the question support this. If library demand were more elastic individuals would pay the higher prices.
since libraries have unlimited budgets publishers simply take advantage of them. Anyone who thinks a university library (or university anything else) has an unlimited budget should reconsider their view of reality :-)