On the theory of public library books Seppo Suominen, Haaga-Helia University of Applied Sciences, Helsinki, Finland

Introduction and motivation Literature A model Data and descriptive analysis Estimation and results Conclusions

Introduction and motivation Finnish citizens are heavy users of public libraries. In 2017, the total number of loans per inhabitant from municipal libraries was 15.57. Most loans were books: 12.17 per capita – also visual and music recordings. Municipal libraries constantly increase the stock of books, recordings and periodicals. Annual book acquisitions per 1000 inhabitants has been recently a bit lower than 300; and 11 to 20 in the case of music recordings, visual recordings and periodicals – also eBook collections. The overall expenses per inhabitants have been a bit less than 60€ annually: personnel expenses about 57 % and acquisitions about 12 %

Introduction and motivation The law of public libraries (1492/2016) expresses that the purpose of these libraries is to promote equal opportunities of the population to civilization and culture, availability and use of information, reading culture and versatile ability to read, opportunities for lifelong learning and the developing of knowledge and active citizenship and freedom of speech. The starting points in achieving these objectives are pluralism, cultural variety and communality Municipals are responsible to offer these public libraries.

Introduction and motivation Several studies have shown that the income elasticity for book demand is higher than one indicating that the demand for books is income sensitive (e.g. Hjorth-Andersen 2000 or Ringstad and Løyland 2006). Book demand is also rather price sensitive (Bittlingmayer 1992) and books and other cultural goods seem to be substitutes. However, the focus in this particular study is library books that are free for library customers.

Introduction and motivation In the Helsinki region, there is one library card (Helmet) which is valid in the cities of Helsinki (population > 600.000, 39 municipal libraries), Espoo (> 260.000, 18 lib.), Vantaa (>208.000, 11 lib.) and Kauniainen (>9000, 1 lib.) and others libraries such as university, National and Parliament libraries where Helmet is partially valid. Helmet libraries typically have less than 400 copies of best sellers Annual sales figure of most sold novels has varied from 55.000 to 74.000 in the whole Finland – 20th most sold: about 10.000 copies Top for children in 2016 was Harry Potter and the cursed child (Rowling, Thorne, Tiffany) with almost 100.000 copies.

Introduction and motivation Since consumers before purchase cannot observe the quality of book, a loan from a public library is a costless method to read the book, however, the number of copies in public libraries is often very limited in relation to loan demand. However, long queues in public libraries forms an opportunity cost which is taken into account when consumers make the decision between purchasing the book and borrowing from the library The purpose of this study is to investigate the determinants of book loans from the Helmet public libraries The top 100 novels in each quarter of the years 2014 – 2017 have been listed

Literature Using the German book market Bittlingmayer (1992) shows that separate title book demand is price sensitive with price elasticity between – 2 and -3. Aggregate book demand Hjorth-Andersen (2000): price elasticity -1.4 Spanish data Prieto-Rodríguez, Romero-Jordán and Sanz-Sanz (2005) show that aggregate book demand is price elastic. Lage differences across households in the purchasing behaviour: single person households or households with children tend to buy more. Books are income elastic: Hjorth-Andersen 1.8 in Denmark, Prieto-Rodríguez et al 1.4 in Spain.

Literature Rather high values of income elasticity  public libraries are more than useful in order to promote equal opportunities to civilization and culture to all citizens. Ashworth, Heyndels and Werck (2010) using a two-year Dutch panel show that winning a prize generally has a positive effect on sales whereas nominations do not have any positive effect. Similar results are presented in Ponzo and Scoppa (2015). Bittlingmayer (1992) argues that the most important variable for explaining book sales is the price of the book but quality factors can be an important source of variation in book sales.

Literature the writer recognition (previous sales) has an effect: Schmidt-Stölting, Blömeke and Clement 2011, Asai 2016 – word of mouth (Beck 2007) Public libraries? Locher (2005): fees reduce the number of borrowings but total borrowing does not decrease due to an increase in borrowings per user. In Denmark (Johannsen 2004): fees have a positive impact on librarian services.

A model In Finland book borrowings are free of charge but the authors and translators receive grants from the state based on borrowings from public libraries. Suppose a publisher to a public library at a price w sells all books and the allowances and grants from local authorities (municipalities) and general government (state) is interrelated to retail price p. Each library at the start of each period buys enough books up to capacity K. The probability of a book being borrowed during the following period is λ. Expected loans in any period are λK where λ depend on library environment (population, location) and it is taken as given for each library

A model At the end of the period, each library receives allowances and grants and pays the workers gL(K) where g is the wage rate. The number of workers L is a function of capacity K, with L´> 0 and L´´ > 0. The rental cost of capacity is The expected present value of a library is then 𝜌𝑐

A model The inverse of the parameter λ is the average loan rate for books at a library. Expected loan amount in any period is λK. The f.o.c. for max of E(PV) with respect to capacity K is The present value maximization capacity K level is

A model The critical probability (break even loan rate) is defined by For a break-even library the value maximizing level of capacity is independent of λ. An increase of retail price reduces the the break-even. 𝜆

A model Thus we should observe a negative relationship between retail price and the number of borrowings of each book since the library would purchase less highly-priced books.

Data and descriptive statistics The sample size is 1600 covering four years and four quarters in each year from 2014 to 2017. The number of novels in the sample is 422. About 80 books were on the top 100 listing during only one quarter as the figure 1 shows. Novels with longer time than 4 quarters (more than one year) in the top 100 list is 132 (about 31 %). One novel has been able to show up for 15 quarters. Each book has thus most often one to three observations as figure 1 presents.

Data and descriptive statistics

Data and descriptive statistics

Data and descriptive statistics The price variable is the price at one retailer: Suomalainen kirjakauppa (online price) – is has 10 shops in Helsinki, 3 in Espoo and 5 in Vantaa. An average author on the top 100 list has had 11 or 12 publications including the one (or more) novels of the list. The bestselling list covers only 20 top novels (most sold) – both domestic and translated literature – also paperback bestselling Dummies: Finlandia award candidate or actual winner each year. Book reviews in Helsingin sanomat (most circulated newspaper in Finland), Suomen kuvalehti (weekly magazine, high quality) and Parnasso (top magazine in the field of literature)

Estimation and results The price variable is the price at one retailer: Suomalainen kirjakauppa (online price) – is has 10 shops in Helsinki, 3 in Espoo and 5 in Vantaa. An average author on the top 100 list has had 11 or 12 publications including the one (or more) novels of the list. The bestselling list covers only 20 top novels (most sold) – both domestic and translated literature – also paperback bestselling Dummies: Finlandia award candidate or actual winner each year. Book reviews in Helsingin sanomat (most circulated newspaper in Finland), Suomen kuvalehti (weekly magazine, high quality) and Parnasso (top magazine in the field of literature) The number of quarters that a novel is on the 100 list

Estimation and results The estimation results in table 2 and 3 show that retail price of the novel has a negative impact on public library borrowings. This is in line with the model presented indicating that public library is bind to obey financial limitations. The demand is price inelastic with approximately -0.1 price elasticity. The estimated value of the quarters is negative showing that the borrowings on average decline as time goes on. The demand is highest nearly the novel has been published.

Estimation and results The author recognition measured by the number of publications is not significant, however, dummies representing various amounts - 1, 2 – 5, 6 – 10, 11 – 20, 21 – 30, 31 – 40 – when the reference value is more than 41 publications seem to place the peak of borrowings if the author has about 21 – 30 novels. Bestselling novels – measured as belonging to top 20 list (table 2) or hardcover sales (table 3) seem to attract more borrowings. The paperback sales has less or no importance on borrowings. The nominations for Finlandia award or rewarding the award has sometimes an important and significant impact on borrowings but not always

Estimation and results Reviews in the literature magazine Parnasso is significant if the nomination variable is not included, otherwise Parnasso is not significant. The circulation number of Parnasso is simply too limited or the magazine is excessively sophisticated to the large audince. The reviews in Suomen kuvalehti and Helsingin Sanomat seem to have a positive impact

Conclusions The estimation results point out the significance of public awareness of novels in determining the demand for borrowings. Reviews in largely circulated newspapers and magazines are important in distributing the awareness. Nominations for the Finlandia award and receiving the award are important in increasing the awareness, however, they do not have always any impact on borrowings. The author publication record is important, but the highest peak in borrowings occurs when the author has had about 20 – 30 publications

Conclusions Public libraries must comply with economic efficiency. They have a binding budget and they cannot simply purchase enough books and other publications to the whole population. Therefore the price of the book has a vital importance. The estimation results show that the demand for borrowings has a negative price elasticity indicating that there exists scarcity in the book stock.

Thank you for your attention.