The Digital Challenge to Public Libraries; Imke Reimers (Northeastern University)

Abstract

Libraries have traditionally drawn patrons together to make shared use of physical books, a practice facilitated by the first sale doctrine which allows libraries to purchase books at the same prices as consumers. On the other hand, library ebooks are not subject to the first sale doctrine. Their prices exceed those charged to consumers and publishers continue to raise them. We explore the consequences of these price differences with a model of the library market consisting of library patrons' demand for physical and ebook borrowing and library choices of physical and electronic holdings. Given the demand model, we rationalize the status quo book holdings with higher library weights on electronic vs physical circulation. We then explore the counterfactual consequences of higher ebook prices. Higher ebook prices would reduce both ebook holdings and circulation, inducing substitution to physical products. While librarian utility would fall, a substitution toward physical book holdings may in fact increase consumer surplus because libraries seem to value ebook circulation more than is socially optimal. We also present descriptive evidence that library substitution from electronic to physical books would stimulate physical use of libraries, which is thought to create important social capital.