Abstract
The purpose of this study is to estimate the impact of price increases and decreases for three, at least partly, compensatory services. The existence of a reference effect in pricing has been commonly accepted. However, the observations of consumer choices with prices below and above the reference price have produced mixed results. Both symmetric and asymmetric behavior has been observed. The current study differs from the mainstream in the way that the object is a service and instead of scanner panel data, stated preferences measured by choice based conjoint analysis are used. Moreover, instead of dealing with changes in value caused by price changes, we consider changes in demand on the respondent level. The main outcome of the study was that with the traditional service the respondents reacted more strongly to price increases (loss) than to price decreases (gain), whereas in the two more modern services the reactions were more versatile; with the majority of respondents the reactions were stronger to price decreases (gain).
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Notes
Scanner panel data includes all the purchases and prices of a representative set of household panels.
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Acknowledgement
We thank J.-P. Timonen, Director of the Finnish Copyright Organization for informational discussion.
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Appendices
Appendix 1: Sample description
Educational level | n | Age (mean) | Use of AV material (%) | Use of printed material (%) | Use of commercial Internet (%) | Use of free Internet (%) |
|---|---|---|---|---|---|---|
Primary and secondary schools | 451 | 43.7 | 20.8 | 57.9 | 1.9 | 19.4 |
Colleges | 248 | 46.0 | 14.8 | 56.8 | 2.3 | 26.1 |
Higher vocational schools | 221 | 46.5 | 10.9 | 57.7 | 4.3 | 27.1 |
Universities | 221 | 41.3 | 7.7 | 62.2 | 7.4 | 22.7 |
All | 1141 | 44.3 | 15.0 | 58.5 | 3.5 | 23.0 |
Appendix 2: Example of a choice task
Appendix 3: Values of attributes employed
Type of Internet material 1. Publishers’ open educational material websites 2. Educational material by educational institutions 3. News; e.g. articles and websites 4. Scientific material from universities and research institutes 5. Pictures; photographs, drawings, maps 6. Communications of companies and public administration; instructions, product and service information | |
Type of reproduction 1. Printing/copying to students 2. Copying into own presentation, e.g. Power Point 3. Delivery to students in school Intranet or e-mail | |
Price, price was dependent on type of usage | |
Printing/copying to students | 1. 4 €, normal |
2. 6 €, normal increased by 50 % | |
3. 2 €, normal decreased by 50 %. | |
Copying into own presentation, e.g. Power Point | 1. 6 €, normal |
2. 9 €, normal increased by 50 % | |
3. 3 €, normal decreased by 50 %. | |
Delivery to students in school Intranet or e-mail | 1. 10 €, normal |
2. 15 €, normal increased by 50 % | |
3. 5 €, normal decreased by 50 %. | |
Appendix 4: Teachers’ role in the decision making process
The study was distributed to the teachers included in the sample in fall 2005. At the time all the educational levels had a collective license that allowed photocopying and printing. The license was provided to the schools by the Ministry of Education. In Finland, teachers typically have a small budget to purchase some teaching materials in addition to school books, e.g. newspapers or digital material. In a business school typically bought materials are Harvard cases. The tight budgets force the teachers to even use their own money to purchase classroom material. QED’s School Market Trends: Teacher Buying Behavior & Attitudes (2001–2002) research report results (2002) showed that teachers spend over one billion dollars of their own money on classroom materials and about $700,000 of discretionary funds from the school and/or district. The photocopying license allowed teachers to photocopy material and the fee is paid in advance by the Ministry of Education. For digital copying no such licenses were effective in 2005 and no such licenses existed in 2010. If a teacher wants to use some material he/she has to ask permission from a copyright owner/publisher and possibly pay for the use.
For digital copyright licenses the markets were expected to change from this collective system. Instead of the Ministry of Education purchasing a collective license to all schools, schools and municipalities buy individually own copyright licenses. Before the license negotiations ended at this solution a system where the teachers were to make all the purchases was planned. Thus the teachers are expected an increasingly autonomous role (Timonen 2012).
In the study, on the screens preceding the preference elicitation tasks it was instructed that the respondents should not pay any attention if the product profiles evaluated were not in the market. They were instructed to think “what is a fair price for the services”.
The open comments in the end of the questionnaire showed that the teachers are responsible in their purchases of school material (comments translated by the authors):
“I noticed that the material type was the first decision criterion and price the second. We have learned well the misery of saving.”
“As a educational manager I am responsible for my faculty budget. Therefore, price is the main decision criterion. 10 euro/ student is the threshold no matter what the service includes.”
Some additional comments showed that the respondents were more familiar with the traditional service:
“The material type is the most important decision criterion. I am not used to deliver material via Internet or power point.”
“I have no power point available and we have only two computer classes in our school. Not all students have computers at home. Therefore, in practice I have to use hard copies more than I wanted.”
Appendix 5: Price comparison of different copyright licenses (2012)
Copyright license selling organization | Country | License terms | License price | Comments |
|---|---|---|---|---|
The copyright organization, Kopiosto | Finland | License for digital copying | €3.48 per pupil in elementary school €9.27 per student in university | The price difference is due to differences in copying volumes. |
The Copyright Licensing Agency, CLA | United Kingdom | Includes photocopying and scanning for primary and secondary education | £0.89 per primary pupil in state school £1.47 per secondary pupil in state school | The price difference between the two license type are due to differences in copying terms and copying volumes. |
License allowing photocopying, scanning and digital copying for Higher Education | £6.44 per full time student in state university | |||
Copyright organization, CCC | USA | Photocopy of journal for academic coursepack or classroom handouts | $ 0.20 per page | This is only one example of fee. The copyright holders set individually the fee for copyright license of his/her work. |
Deliver material via e-mail | $7/one student $83/20 students |
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Halme, M., Somervuori, O. Choice behavior of information services when prices are increased and decreased from reference level. Ann Oper Res 211, 549–564 (2013). https://doi.org/10.1007/s10479-013-1350-3
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DOI: https://doi.org/10.1007/s10479-013-1350-3