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Optimal pricing and grant policies for museums

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  • Juan Prieto-Rodríguez

    ()

  • Víctor Fernández-Blanco

Abstract

The “free access” policy designed by the British Government has encouraged interest in museum financial issues. We define a principal-agent model for museum administration where there are two income sources: public grants and ticket revenues. This model allows us to define the optimal contract determining public grants, ticket prices, budget and managerial effort. We find a theoretical explanation for the inelastic pricing strategy commonly adopted in cultural economics. We further find that museum manager should never have any control over the price of tickets. The model can also be applied to other institutions, such as schools or NGOs, which are able to raise funds directly from private (e.g., ticket revenues or membership fees) or public sources. Copyright Springer Science+Business Media, B.V. 2006

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Bibliographic Info

Article provided by Springer in its journal Journal of Cultural Economics.

Volume (Year): 30 (2006)
Issue (Month): 3 (December)
Pages: 169-181

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Handle: RePEc:kap:jculte:v:30:y:2006:i:3:p:169-181

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Web page: http://www.springerlink.com/link.asp?id=100284

Related research

Keywords: Grants; Public valuation; Public prices; Museums; Principal-agent model;

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References

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  1. Macho-Stadler, Ines & Perez-Castrillo, J. David, 2001. "An Introduction to the Economics of Information: Incentives and Contracts," OUP Catalogue, Oxford University Press, edition 2, number 9780199243273.
  2. Bruno S. Frey & Stephan Meier, . "The Economics of Museums," IEW - Working Papers 149, Institute for Empirical Research in Economics - University of Zurich.
  3. Jorge Onrubia & Rafael Salas & José Sanz, 2005. "Redistribution and labour supply," Journal of Economic Inequality, Springer, vol. 3(2), pages 109-124, August.
  4. Frey, Bruno S, 1994. "Cultural Economics and Museum Behaviour," Scottish Journal of Political Economy, Scottish Economic Society, vol. 41(3), pages 325-35, August.
  5. Heilbrun,James & Gray,Charles M., 2001. "The Economics of Art and Culture," Cambridge Books, Cambridge University Press, number 9780521637121, April.
  6. Juan Prieto-Rodriguez & Victor Fernandez-Blanco, 2003. "Optimal Pricing And Grant Policies For Museums," Public Economics 0309002, EconWPA.
  7. Luis Ayala & Rosa Martínez & Jesús Ruiz Huerta, 2003. "Equivalence scales in tax and transfer policies," Investigaciones Economicas, Fundación SEPI, vol. 27(3), pages 593-614, September.
  8. Stephen Bailey & Peter Falconer, 1998. "Charging for Admission to Museums and Galleries: A Framework for Analysing the Impact on Access," Journal of Cultural Economics, Springer, vol. 22(2), pages 167-177, June.
  9. John W. O'Hagan, 1995. "National Museums: To Charge or not to charge?," Economics Policy Papers 952, Trinity College Dublin, Department of Economics.
  10. William Luksetich & Mark Partridge, 1997. "Demand functions for museum services," Applied Economics, Taylor & Francis Journals, vol. 29(12), pages 1553-1559.
  11. Daniel R. Marburger, 1997. "Optimal ticket pricing for performance goods," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 18(5), pages 375-381.
  12. Juan Gabriel Rodríguez & Rafael Salas, 2004. "A Bistochastic Nonparametric Estimator," Economic Working Papers at Centro de Estudios Andaluces E2004/22, Centro de Estudios Andaluces.
  13. Peter Johnson & Barry Thomas, 1998. "The Economics of Museums: A Research Perspective," Journal of Cultural Economics, Springer, vol. 22(2), pages 75-85, June.
  14. Guesnerie, Roger & Laffont, Jean-Jacques, 1984. "A complete solution to a class of principal-agent problems with an application to the control of a self-managed firm," Journal of Public Economics, Elsevier, vol. 25(3), pages 329-369, December.
  15. David Maddison & Terry Foster, 2003. "Valuing congestion costs in the British Museum," Oxford Economic Papers, Oxford University Press, vol. 55(1), pages 173-190, January.
  16. David Maddison, 2004. "Causality and Museum Subsidies," Journal of Cultural Economics, Springer, vol. 28(2), pages 89-108, May.
  17. Adrian Darnell, 1998. "Some Simple Analytics of Access and Revenue Targets," Journal of Cultural Economics, Springer, vol. 22(2), pages 189-196, June.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Weekly report (Od bedaka do junaka)
    by andee in V krizi smisla tiči misel on 2011-10-08 12:00:00
  2. Vstopnine v muzeje da ali ne?
    by andee in V krizi smisla tiči misel on 2010-12-03 12:00:00
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Cited by:
  1. Bruno S. Frey & Stephan Meier, . "The Economics of Museums," IEW - Working Papers 149, Institute for Empirical Research in Economics - University of Zurich.
  2. Santiago Alvarez-Garcia & Juan Prieto-Rodriguez & Rafael Salas, 2003. "The evolution of income inequality in the European Union," Public Economics 0309003, EconWPA.
  3. Juan Prieto Rodríguez & Víctor Fernández Blanco, . "Optimal Pricing And Grant Policies For Museums," Working Papers 3-02 Classification-JEL :, Instituto de Estudios Fiscales.
  4. João Coelho & Carlos Santos, 2008. "The Budgeting of Portuguese Public Museums: a dynamic panel data analysis," Working Papers de Economia (Economics Working Papers) 032008, Faculdade de Economia e Gestão, Universidade Católica Portuguesa (Porto).
  5. Eva Vicente & Pablo de Frutos, 2011. "Application of the travel cost method to estimate the economic value of cultural goods: Blockbuster art exhibitions," Hacienda Pública Española, IEF, vol. 196(1), pages 37-63, january.
  6. Douglas Noonan, 2007. "Fiscal pressures, institutional context, and constituents: a dynamic model of states’ arts agency appropriations," Journal of Cultural Economics, Springer, vol. 31(4), pages 293-310, December.
  7. Bruno S. Frey & Lasse Steiner, 2010. "Pay as You Go: A New Proposal for Museum Pricing," CREMA Working Paper Series 2010-10, Center for Research in Economics, Management and the Arts (CREMA).

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