I describe some of the issues involved in pricing information goods such as computer software, databases, electronic journals and so on. In particular I discuss the incentives to engage in differential pricing and examine some of the forms such differential pricing may take. This paper was presented at the Research Libraries Group Symposium on "Scholarship in the New Information Environment" held at Harvard Law School, May 2-3, 1995 and will be published in the conference proceedings.Digital materials typically have the property that it is very costly to produce the first copy and very cheap to produce subsequent copies. It is often said, for example, that the "first copy costs" are more than 70% of the cost of an academic journal. Cost structures of this form pose special problems for pricing.The first problem is that it is very difficult to sustain a competitive market with this sort of cost structure. Economists define a purely competitive market to be one where there are "several" producers of an identical commodity. The market for wheat, corn, shares of IBM stock, etc. are all examples of purely competitive markets. The market for automobiles is not purely competitive since there are not multiple producers of identical products. Instead, there are several somewhat different

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