Introduction

THIS LIBRARY TRENDS ISSUE contains contributions from library and information science researchers as well as economists. The contributors were identified based on their previous empirical research and publications in economics of libraries and library information services. The manuscripts were reviewed by the issue editors, the Library Trends editor-in-chief, as well as an anonymous reviewer when necessary. Final approved articles are included in this issue. Publications in this issue are characterized by empirical research. Almost all the contributions are empirical in terms of having theoretical or analytical frameworks, and original data collection, or real-world cases.

The theme of this issue is economics of libraries. However, when discussing economics of libraries, one would naturally think of economics of information since libraries are information-provision institutions and many library operations and management decisions are made based on costs of journal subscriptions, monographs, databases, and online information systems. The scope of economics of information is much broader than many think. The literature on economics of information and libraries may consist of the following areas: asymmetric information (e.g., George A. Akerlof, 1970; A. Michael Spence, 1974; and Joseph E. Stiglitz, 1977); microeconomic studies on libraries as decision-making institutions, such as studies on economies of scale and management of libraries using production functions (e.g., Stanley W. Black, 1969; Robert M. Hayes, 1979) and cost functions (e.g., Michael D. Cooper, 1979, 1983; Paul Kantor, 1981; Larry DeBoer, 1992; Lewis G. Liu, 2002), cost-benefit studies of library operations, services, and databases (e.g., Bruce Kingma, 1998; Gary W. White & Gregory Alan Crawford, 1998), cost and planning models of libraries (e.g., William J. Baumol & Matityahu Marcus 1973; Charles McClure et al., 1995), and data envelopment analysis of library operations (e.g., Tser-yieth Chen, 1997; Donald E Vitaliano, 1998; Andrew Worthington, 1999; Kehm R Sharma et al., 1999); economics of scholarly publishing and communication (e.g., H. C. Peterson, 1992; G.A. Chressanthis & J. D. Chressanthis, 1994; Richard E. Quandt, 1996; Roger G. Noll, 1996; Carol Tenopir & Donald W. King, 1997; Andrew M. Odlyzko, 1999; Mark J. McCabe, 2000); financial management of libraries and information services (e.g., Stephen A. Roberts, 1985, 1998); outputs, performance measures, and evaluations of libraries and information services (e.g., D. W. King & F. W. Lancaster, 1969; F. W. Lancaster, 1977, 1993; Paul Kantor, 1984; Nancy A. Van House et al., 1987, 1990;J. C. Bertot, C. R. McClure, & J. Ryan, 2001); (1) economics of networks (e.g., M. L. Katz & C. Shapiro, 1985; N. Economides, 1996) and economics of the Internet (e.g.,J. K. MacKie-Mason & H. R. Varian, 1995); information as a public good versus information as a commodity and free information versus fee-based information (e.g., Ellen Gay Detlefsen, 1984; Roger McCain, 1988; Charles W. Robinson, 1989; Maribelle M. Davis, 1991; Anne Goulding, 2001); and economics of intellectual property and copyright protection (e.g., S. M. Besen & S. N. Kirby, 1989).

This list is by no means exhaustive. It intends to highlight some important research areas in economics of information and libraries. Some of these areas have been studied by both economists and library and information science scholars. Other areas have been only the concerns of economists. While this issue does not cover all the above areas due to the time limit to complete this issue and limited pages allowed, the contributions cover a wide range of issues related to economics of libraries and information services and can be classified into four broad categories: economics of academic libraries, public libraries, library cooperation, and financial management of libraries. They not only reflect the new research trends but also reflect the continuation of this body of research literature from the past.

ASYMMETRY OF INFORMATION

Many economists study economics of information in terms of asymmetric information, adverse selection, and moral hazard. They examine how possession of information or dispossession of information affects the market system. This body of research literature has been developed solely by economists. Some important theories are represented by the works of three economists, George A. Akerlof, A. Michael Spence, and Joseph E. Stiglitz, who have recently received Nobel prizes for their work in this area.

The notion of asymmetric information was illustrated by George A. Akerlof (1970) with a seemingly simple observation: in a market transaction, sellers know something that buyers do not know and buyers know something that sellers do not know. When asymmetric information exists between buyers and sellers, market failure occurs. An example given by Akerlof was the used car market where the buyer does not know which used cars are good ones and which used cars are bad ones. The seller is motivated to mislead the buyer. And the buyer expects that and discounts the price of the used car he or she tries to buy. Since the sellers of good-quality cars are less willing to sell their cars at discounted prices, bad cars eventually drive good cars out of the market. Such a downward discounting effect is called adverse selection. A. Michael Spence (1974) explored asymmetric information in the labor market. He observed that job applicants tend to "signal" their ability to potential employers through costly education. Since potential employers cannot directly observe job candidates' ability, they screen job candidates by examining their educational credentials and records. Joseph Stiglitz and Michael Rothschild (1976, 1977) investigated the effects and economic policy implications of asymmetric information in the insurance market. Stiglitz explained how insurance companies use the screening process to identify high-risk insurers and use various price structures, such as deductibles and premiums to classify insurers by their risk levels.