Bundling Electronic Journals and Competition among Publishers

Site licensing of electronic journals has been revolutionizing the way academic information is distributed. However, many librarians are concerned about the possi-bility that commercial publishers might abuse site licensing by practicing bundling. In this paper, we analyze how bundling affects journal pricing in the market of scientiÞc, technical and medical (STM) electronic journals and offer a novel insight on the bundling of a large number of information goods. We Þnd that (i) when bundling is prohibited, surprisingly, industry concentration does not affect prices (ii) when bundling is allowed, each publisher Þnds bundling proÞtable and bundling increases the industry proÞt while reducing social welfare and (iii) any merger among publishers already active in the market is proÞtable but reduces social welfare