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compilations were limited in indexing methods to principally the subject matter and the author(s). In addition, libraries, except the very largest, did not always contain the range of information required to meet the needs of a variety of researchers. To complete an in-depth literature search might require visits to one or more libraries. Thus, from the researcher's point of view, the library, as a non-computerized STI system, was difficult to use; time consuming; not readily available; often incomplete, and subject to errors and omissions. However, the library, as an STI system, was not without some merits. It provided, through browsing, a means to circumvent the limitations of cataloguing reference material or compilations of abstracts. Furthermore, full text storage of books, periodicals, and journals at a library allowed the researcher to investigate in-depth his topic of interest.

The development of an on-line disc storage medium provided the capability to extend the total storage capacity of a computer system. Prior to the development of disc technology, the computer had to contain information within its main memory or retrieve information from a magnetic tape. The main memory was limited in size, although information within it could be accessed within microseconds. As noted earlier, magnetic tape could hold sufficient material to develop a computerized STI system but, as a sequential access medium, each search would require the time consuming process of reading the entire tape.

The development of disc technology meant that the computer system could not only accommodate the large volumes of information required to establish computerized STI systems, but each information record could be found within a short time frame. A disc is a random access storage device as opposed to a magnetic tape which is sequentially accessed. Thus, key characteristics of computers, speed and high volume data manipulation, were matched, in part, to the pragmatic requirements of a computerized STI system.

While disc storage brought a high volume on-line capability to computer systems, the search for information contained within data bases needed a specific applications program to perform the search. Programs already existed for data base manipulation. Until the state-of-the-art advanced, data base management systems were designed for specific operations. Referring to the original STI system, the library, this was equivalent to each library having its own card catalog. Books could not be transferred to another library with recataloguing, and each researcher would need to be knowledgeable of several library systems. Within each library "management system" the ease of the system would also vary depending upon the creativity of the system designers. The resulting nonconsistencies led to the development of general purpose data base management systems.

This technology is the second key element of computerized STI systems because it provided a means of organizing information and searching information so that several users could use the system simultaneously. Its organizational structure was flexible so that data bases could be created from a variety of sources. This was important since formats of STI data bases vary according to the type of data base. The content of a scientific data base would vary from that of an economic data base, etc.

Data base management systems search through data bases using a variety of methods. Most are based on an indexed system in which certain key words or identifiers are examined, rather than each record. In this manner, time is conserved and the computer resources are utilized more efficiently.

The user makes use of key words to describe a subject, author or interest area. The data base management system can then determine if a match (hit) occurs with the contents of the data base. The data base management system is quite powerful since it permits the search words to be combined with Boolean Algebra Logic. This capability adds power to the researcher's ability to clearly identify the search topic.

A skilled computerized STI user can perform complex searches using the Boolean operators. The result is that the computer STI system user has reduced his search time considerably over using a library and increased his ability to find information.

The third key element which enhanced the development of computerized STI systems is development of data communications systems which enable many widely geographically dispersed users to access an STI system concurrently. Without a data communication network, the users would be limited to those at or nearby the STI facility. Economically, this perspective would not justify the large hardware/software costs and data base lease rates required to establish an STI facility. Data communications has allowed the linking together of many remote users into a market large enough to support the operating costs associated with large general purpose computer systems.

The area of data communications includes both the network of dedicated or leased lines and the specialized communications hardware/software. At present on-line communications speed are relatively slow (in the order of 30 characters per second). Higher speeds, although technically available, require costly line conditioning equipment. In addition,

with the current STI systems, the results of a search are usually no more than a few pages of information. Large volumes can be directed to the high speed printer at the STI facility; where the cost is less than online printing. If full text retrieval were available under present conditions, the costs of high speed communications and printing at the user's location would require a careful evaluation as to whether the text was time critical. This situation, of course, could change if the economics of STI system user were reduced. At present, it appears that 30 characters per second communications speeds are sufficient for most STI system users.

APPENDIX B

THE ROLE OF TRANSACTION COSTS IN THE

DESIGN OF ROYALTY PRICING SCHEMES FOR STI

by

Y. M. BRAUNSTEIN* and J. A. ORDOVER*

NEW YORK UNIVERSITY

*The views presented in this paper are solely those of the authors and do not necessarily represent those of New York University.

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In this paper, we shall discuss various schemes for collection of royalty payments for reproduction of scientific and technical information (STI). We shall concentrate on the costs that accompany the enforcement of royalty price schedules. These costs are referred to in the economic literature as transaction costs. These costs have to be included in the design of actual pricing schedules. Indeed, a major argument for excluding certain users from payment is that the transaction costs associated with the collection of payment from these uses exceed the benefits of doing so. We would expect that such arrangements can be worked out between the users and sellers without a necessary intervention of the legislature or the courts.

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The blanket license system involves a set payment to the owner of a copyright. Once payment is made, an unlimited amount of photocopying can be done.

There are two species of blanket licensing:

(i) direct licensing;

(ii) clearinghouse licensing.

Under (i) the owner of the copyright negotiates directly with the user of a journal/library for a fee. Under (ii) the

e copyright owner negotiates indirectly through the clearinghouse which pools various copyrights. System (ii) is analogous to the one employed in the music area.

The

Comparative economics would seem to favor the second variant. major saving is in transactions costs: both in the case of a publisher negotiating agreements with a multitude of users and in the case of the user (library) negotiating with a multitude of copyright holders. Another major saving for the user results from a reduction in the number of payments that will have to be made. A similar reduction exists on the publisher's side. There are, however, important additional costs that appear if (ii) is used, rather than system (i). The major new cost is associated with the necessity of monitoring the photocopying in individual libraries in order to determine an equitable distribution of the proceeds. These costs may be significant. According to their own estimates, ASCAP's transaction costs amount to approximately 20 percent of their gross revenue. Such costs would not be expanded under the direct licensing scheme. This is not to say that the direct licensing scheme does not require some monitoring of use, since under this scheme the extent of use will be important in setting the fee.

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