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2 Incentives and Disincentives Affecting the Availability and Use of Scientific and Technical Databases
Pages 40-50

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From page 40...
... This chapter points out the divergent objectives of organizations that produce and distribute S&T databases, and it outlines some of the economic factors affecting access to such data. In addition, it elaborates on the committee's conclusion that any new legislation that would change the status quo must take into account how it would alter the incentives to produce both original and derivative databases, how it would affect the dissemination and use of databases (especially regarding whether access would be exclusive or unrestricted, particularly for the scientific community)
From page 41...
... In government and not-for-profit research organizations, including universities, basic research institutes, and national laboratories, the advancement of knowledge as an intrinsic good and in the service of national goals motivates the production and distribution of S&T databases; exploiting data for financial gain is subordinate to fulfilling public-interest objectives. The data products of notfor-profit and government organizations are judged primarily by criteria that are not directly profit related, such as their value to end users, their potential value in advancing a field, their ability to enhance the status of an institution and its research or educational capabilities, and similar objectives typically associated with public-interest or public-good activities related, for example, to improving knowledge of disease factors or interdependencies within ecosystems.
From page 42...
... instead using such databases as a marketing tool for other products or services, or choosing revenue-generating methods such as advertising as an alternative to charging users for access to data. Such exceptions, however, usually are seen in non-scientific database markets that have large user clienteles.3 3 See generally Computer Science and Telecommunications Board, National Research Council (2000)
From page 43...
... Achieve corporate objectives, including profit making and growth, and ensure shareholder and customer satisfaction Support development of new or improved products or services; develop databases for direct sale or lease as products or as services in support of other products or services Disseminate data to protect competitive advantage when databases are used for development of other products or are themselves products or services; disseminate via sale or license to generate revenue, enhance customer base and market position, gain competitive advantage, achieve profits, or recover costs Internal and confidential, or available/ marketed externally at a cost set by the organization Very high; databases regarded as investments to be protected whether they are used in product development or are themselves products or services to be sold SCIENTIFIC AND TECHNICAL DATABASE COSTS, PRICING, AND ACCESS Despite their differences in mission and motivation, organizations in all three sectors are constrained by financial responsibilities: federal government agencies must justify their expenditures to Congress; not-for-profit entities must make their organizations at least viable (with any excess of income over expenses reinvested in the organization) ; and commercial firms must answer to shareholders.
From page 44...
... Distribution costs include the cost of making, sending, and billing for physical copies; any additional transaction costs such as those for licensing and related administrative activities; and user-specific costs such as those for database maintenance and specialized handling. Distribution costs tend to be much lower than database production costs, particularly if the Internet is the medium of dissemination and little effort is devoted to marketing or user assistance.
From page 45...
... The users' welfare could be enhanced without increasing the burden on taxpayers if users were allowed to buy access to the data at the marginal cost of dissemination.4 An efficient-access price will almost never generate revenue that matches the database production costs.5 Instead, the database must be subsidized in some way. Cost recovery has an equity justification, namely that the database is paid for by the users instead of being subsidized out of general revenue.
From page 46...
... Stronger Statutory Protection and the Incentives for Investment There is a natural link between cost recovery and protection of databases.9 If databases can be copied without any legal constraints or otherwise freely acquired by users or competitors, then the rights holders will not recover their costs and hence will have no incentive to produce databases.l° Stronger statutory protection might help prevent unauthorized copying, particularly in unprotected digital formats, and thus promote cost recovery and improve profit margins. In this way it could provide incentives for the creation of new databases in the private sector, especially by commercial entities.
From page 47...
... In many cases in which the government produces databases, it distributes the raw or partially processed data as a public good and lets not-for-profit organizations and commercial firms customize the data for special market segments or individual users. This achieves a better balance between requirements for cost recovery and the advantages to the public of efficient-access pricing.
From page 48...
... As mentioned above, subsidies avoid the market test of whether the willingness to pay for the data exceeds their cost. Commercial provision at higher prices must face this market test, but the higher prices inefficiently restrict access.
From page 49...
... However, basic principles of optimal taxation suggest that income taxes are less distorting than isolated excise taxes. See, for example, Richard Tresch (1981)
From page 50...
... Thus, science agencies in the United States are increasingly turning to the private sector, to both not-for-profit and commercial entities, in outsourcing government S&T database dissemination activities, or even to purchase data from commercial suppliers. For example, in order to promote private-sector investment and development of space technologies and applications, the Commercial Space Act of 1998 encourages NASA an agency engaged to a substantial degree in basic research activities to purchase space and Earth science data products and services from the private sector, and to treat data as a commercial commodity under federal procurement regulations.


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