The Simple Theory of Public Library Services.

by Joseph P. Newhouse

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A method for deciding which books a library should buy, assuming it can predict demand. The method also applies to other public services where the user could buy similar services on the open market, and assumes that the benefit from the public service can be approximately measured by the cost of the private good. The formula considers both borrowers who would otherwise buy the book, and those excluded by the price. The decision rule results in encouraging the purchase of expensive, frequently requested books. However, it is reasonable to set distributional constraints to ensure that all the book budget is not spent on one type of book. Charging a book reservation fee ensures that those who want the book most get it first. Fines for late return should vary with demand. The probability of paperback publication complicates the determination of a book's value; the theory of discriminating monopoly rather than simple monopoly comes into play. 14 pp. (MW)

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