Arnold Kling  

Usage-Based Pricing for Books

Two Long Reads... Simon Johnson on Econtalk...

Joshua Gans suggests the model.

How would this occur? I imagine that there is a vast exchange available -- maybe we could call it a library -- where all books ever written are available. Publishers nominate reading prices for their books and consumers read books. One model has the consumers may the publishers the fees the publishers quote but that isn't the only one. I could imagine that the exchange might sell access at a subscription fee that didn't require consumers to feel the marginal cost of reading another chapter or trying a book. The subscription fees would then comprise revenue and the publishers would then get paid from that according to their nominated fees and information gathered on actual reading from consumers.

The same could hold for music, or for software apps. Gans alludes to the fact that there would be a lot of mental transaction costs associated with having consumers pay strictly on the basis of usage. Instead, some sort of tiered pricing model makes sense--pay on the basis of monthly usage (low, medium, or high) rather than on the basis of usage of each particular book or song.

I proposed something roughly like this here and here, but that was before the technology evolved to where a central library could have an easy time monitoring usage.

Comments and Sharing

COMMENTS (12 to date)
lemmy caution writes:

People hate micro payments. They also hate tiered pricing. You need to arrange it to be a fixed price system.

KendallB writes:

What about the mental transaction cost of not having read anything in a given month, but still having paid for it?

Ian B writes:

Sounds like Joshua is describing netflix.

prometheefeu writes:

Your model relies heavily on the government enforcing private monopolies on ideas. Sounds destructive to me.

Miguel Madeira writes:

What 's the big difference between this and a lending library?

James writes:


If you and I are both forced to fund a lending library but I read many books and you read few, I am free riding on you. In the model Gans describes, I cannot exploit you in this way.

Martin Regnen writes:

Something sort of like this already exists for music in a lot of countries. In the US venues which host live music, like bars, pay annual fees to ASCAP and BMI who then distribute money to their members based on statistical measures of song popularity.

Miguel Madeira writes:

"If you and I are both forced to fund a lending library but I read many books and you read few"

Sorry by my bad English - by "lending library" I wanted to say "a library who rents books" (like are common in the first decades of last century).

Seth writes:
Nathan Smith writes:

Google or Facebook or one of the big tech platforms could set this up. I'm all for it. Do it as micro payments with a monthly maximum. Bookworms won't have to worry about the marginal cost of reading. Very occasional readers won't have to worry too much about cross-subsidizing bookworms.

John David Galt writes:

The biggest problem with this model is that once you pay a content provider, you may find out the hard way that you don't really have all the rights you've paid for (or at least, you don't effectively have them, since the work is under a "DRM" system that the content provider controls, and it restricts a whole host of activities that would not violate the provider's actual IP rights if you did them).

This is not paranoia. It has already happened, in cases ranging from Amazon's Kindle to Microsoft Windows to CD and DVD disk technologies. And a large part of the market has reacted quite rationally by resoundingly refusing to use those technologies.

If I can't own my own copy of your content, on hardware I can trust to handle it my way and not yours, then you can keep it. No one in the content business is trustworthy any longer: especially the big media conglomerates.

Daublin writes:

Nice idea.

It is similar to the way we already distribute music over radio. Users subscribe in bulk. The radio stations track--crudely, I imagine--what music users are listening to. They then buy more of the popular music and less of the unpopular.

I hope it catches on. I would dearly like us as a society to get away from right-to-copy being so prominent in IP.

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