Why not underwrite hybrid fees?

December 20th, 2009

Several publisher representatives have recently asked about why the Harvard open-access fund does not cover hybrid fees. I thought I’d explain my thinking on this issue, though I am certainly not doctrinaire when it comes to institutional underwriting of hybrid fees, and am perfectly in accord with institutions coming to different decisions on the issue.  In fact, as I mention below, I can imagine (counterfactual) situations in which I would support Harvard’s open-access fund underwriting hybrid fees.

In the case of the current Harvard policy, I’ll explain why for the time being at least we are not underwriting hybrid fees.  My comments extend the arguments I give in my PLoS Biology paper.

Hybrid fees would be worth supporting to the extent that (as their proponents claim) they provide an approach to smoothly transitioning to an open-access publication fee business model.  The argument is that as uptake increases in payment of the hybrid fees, revenue smoothly shifts from the reader side to the author side in a revenue-neutral way.  At the end, the journal is openly accessible, with hybrid fees (now become just publication fees) providing the revenue.  To the extent that the hybrid system works this way, there is no “double dipping” — using hybrid fees as a way to increase revenue rather than transitioning to OA in a revenue-neutral manner.  I’ll call such a model “true hybrid”.

There are two problems with supporting hybrid fee systems.  First, they may not be set up in the way just described as true hybrids, and determining whether this is the case may in fact not be possible.  Second, even if they were set up in this way, game-theoretic problems may inhere in the system that prevent them from realizing the transition.

Whether “double dipping” is going on is independent of when the hybrid option is set up.  In particular, whether a journal is hybrid from the start or a hybrid option is added well after the journal is founded is irrelevant.  What matters is the dynamics of how hybrid uptake affects subscription fees and revenues.  To be a true hybrid model, hybrid fees must be set at a rate no more than the true average revenue per article, so that universal uptake of hybrid payments is not a means to revenue enhancement.  Further, uptake of hybrid fee revenues must be directly offset by reductions in subscription fee revenues, so that incremental uptake of hybrid payments is not a means to revenue enhancement.

True hybrid journals must therefore have a degree of transparency that is difficult to imagine achieving.  The journal would have to demonstrate linearly decreasing subscription fees in direct proportion to the hybrid fee uptake.  Determining hybrid fee uptake is straightforward.  But determining subscription fee reduction is not.  Publishers practice price discrimination, bundling, and price changes over time, which separately and together make it impossible to tell what a subscriber’s costs would have been absent the hybrid fee discount.  The issue of transparency is not all or nothing.  Certainly some publishers, Oxford University Press for instance, may be more transparent than others in their hybrid discounting practice.  But determining whether appropriate reductions are taking place is difficult at best.

Even if there were some way to determine that a journal were a “true hybrid”, receiving no incremental revenue from its hybrid program, there is a more fundamental problem with the normal way in which hybrid programs are implemented, viz., that subscription revenue reductions are shared among all subscribers.  As institutions decide whether or not to underwrite hybrid journals, they are confronted with a kind of prisoner’s dilemma.

In a prisoner’s dilemma, a set of agents can either cooperate or defect.  If they all cooperate, all are better off.  But if any defect, all are worse off except for the defector.  In the case at hand, a cooperating institution underwrites hybrid fees, a defecting institution does not.  Given a status quo ante (as we have) of all institutions defecting, all would be better off if they cooperated, since they would pay the same amount (true hybrids being revenue-neutral) but would gain open access.  However, at the margin, an institution cooperating sees increased costs from the hybrid fees, but only a share (and a small one at that) of the subscription revenue reduction.  Defectors see a reduction in their subscription costs relative to the status quo ante at no cost to themselves.  Though both fully defecting and fully cooperating are equilibria,[1] there is no transitional path from the former to the latter.  This is an inherent flaw in the hybrid system as traditionally conceived.  Empirical evidence accords with this analysis; uptake of hybrid fees has been exceptionally low.

It may be that institutions can be convinced to act temporarily against their financial interests in the expectation that others will join them and the cooperating equilibrium will be reached.  Especially in the current economic climate, I’m not sanguine about this prospect.  And without such temporary action against self-interest, the hybrid model is no transitional model at all.  If however, evidence accumulates that the transparency problem can be addressed and true hybrids can be identified and institutions appear increasingly willing to pay these fees against temporary self-interest, I can imagine that the Harvard fund might then change its policy for support.  Similarly, if changes to the hybrid model were made that eliminated the prisoner’s dilemma — I believe that this may be possible, and hope to talk about it in a future post — then again hybrid fees ought to be supportable for true hybrid journals.

[1]Actually, full cooperation is not an equilibrium per se, as each agent still has an incentive to defect from cooperation even at that point. However, once all agents (or even most) were to cooperate, the hybrid system could be jettisoned for a true OA model that effectively removed the defecting alternative.