IDEAS home Printed from https://ideas.repec.org/p/wpa/wuwppe/0309002.html
   My bibliography  Save this paper

Optimal Pricing And Grant Policies For Museums

Author

Listed:
  • Juan Prieto-Rodriguez

    (University of Oviedo & IEF)

  • Victor Fernandez-Blanco

    (University of Oviedo)

Abstract

Considering two potential sources of income (public grants and ticket revenues),we have defined a theoretical model where the public agency is the principal and the manager of the museum is the agent. This model allows us to design the optimal contract between both sides and thus to establish the optimal values of grants, ticket prices, budget and effort applied by the manager. Furthermore, we have found a theoretical reason to explain the inelastic pricing strategy that has been found in some of the empirical research on cultural and sports economics. The main conclusion is that the optimal contract allows a Pareto optimum solution in prices that does not change if we introduce moral hazard into this relationship. This solution allows us to conclude that the public agency should regulate ticket prices in accordance with the social valuation. However, public grants and museum budgets would be affected by the existence of this problem, moving the equilibrium away from the Pareto optimum situation. In this case, even with a risk averse manager and a risk neutral public agency, grants and budgets will depend on results because higher budgets related to good results provide the main incentives to increase the manager’s level of effort. Although the focus of this paper is on museum administration, the model that we have developed can be easily generalized and applied to other institutions, such as schools, sport facilities or NGOs, which are able to raise funds directly from private (e. g. ticket revenues or membership fees) or public sources (e.g. public grants).

Suggested Citation

  • Juan Prieto-Rodriguez & Victor Fernandez-Blanco, 2003. "Optimal Pricing And Grant Policies For Museums," Public Economics 0309002, EconWPA.
  • Handle: RePEc:wpa:wuwppe:0309002
    Note: Type of Document - PDF
    as

    Download full text from publisher

    File URL: http://econwpa.repec.org/eps/pe/papers/0309/0309002.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Jorge Onrubia & Rafael Salas & José Sanz, 2005. "Redistribution and labour supply," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 3(2), pages 109-124, August.
    2. Juan Prieto-Rodríguez & Víctor Fernández-Blanco, 2006. "Optimal pricing and grant policies for museums," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 30(3), pages 169-181, December.
    3. Frey, Bruno S. & Meier, Stephan, 2006. "The Economics of Museums," Handbook of the Economics of Art and Culture, Elsevier.
    4. 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.
    5. 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.
    6. Juan Gabriel Rodríguez & Rafael Salas, 2004. "A Bistochastic Nonparametric Estimator," Economic Working Papers at Centro de Estudios Andaluces E2004/22, Centro de Estudios Andaluces.
    7. John W. O'Hagan, 1995. "National Museums: To Charge or not to charge?," Economics Policy Papers 952, Trinity College Dublin, Department of Economics.
    8. Heilbrun,James & Gray,Charles M., 2001. "The Economics of Art and Culture," Cambridge Books, Cambridge University Press, number 9780521637121, May.
    9. Daniel R. Marburger, 1997. "Optimal ticket pricing for performance goods," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 18(5), pages 375-381.
    10. 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;The Association for Cultural Economics International, vol. 22(2), pages 167-177, June.
    11. 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.
    12. Peter Johnson & Barry Thomas, 1998. "The Economics of Museums: A Research Perspective," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 22(2), pages 75-85, June.
    13. Frey, Bruno S, 1994. "Cultural Economics and Museum Behaviour," Scottish Journal of Political Economy, Scottish Economic Society, vol. 41(3), pages 325-335, August.
    14. Adrian Darnell, 1998. "Some Simple Analytics of Access and Revenue Targets," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 22(2), pages 189-196, June.
    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;The Association for Cultural Economics International, vol. 28(2), pages 89-108, May.
    17. William Luksetich & Mark Partridge, 1997. "Demand functions for museum services," Applied Economics, Taylor & Francis Journals, vol. 29(12), pages 1553-1559.
    Full references (including those not matched with items on IDEAS)

    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Vstopnine v muzeje da ali ne?
      by andee in V krizi smisla tiči misel on 2010-12-03 18:00:00

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. 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.
    2. Juan Prieto-Rodríguez & Víctor Fernández-Blanco, 2006. "Optimal pricing and grant policies for museums," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 30(3), pages 169-181, December.
    3. Muzychuk, V. & Khaunina, E., 2015. "Support Mechanisms for Museums in the Economic Crisis (the Example of Major Museums of Europe and Russia)," Journal of the New Economic Association, New Economic Association, vol. 25(1), pages 132-161.
    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, Católica Porto Business School, Universidade Católica Portuguesa.
    5. Elena GORI & Silvia FISSI, 2013. "From Cash to Accrual Accounting: A Model to Evaluate the Performance of Public Museums," REVISTA DE MANAGEMENT COMPARAT INTERNATIONAL/REVIEW OF INTERNATIONAL COMPARATIVE MANAGEMENT, Faculty of Management, Academy of Economic Studies, Bucharest, Romania, vol. 14(4), pages 519-541, October.
    6. Juan Prieto-Rodríguez & Rafael Salas & Santiago Álvarez-García, "undated". "The Evolution Of Income Inequality In The European Union," Working Papers 10-02 Classification-JEL , Instituto de Estudios Fiscales.
    7. Douglas Noonan, 2007. "Fiscal pressures, institutional context, and constituents: a dynamic model of states’ arts agency appropriations," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 31(4), pages 293-310, December.
    8. Bruno S. Frey & Lasse Steiner, 2010. "Pay as you go: a new proposal for museum pricing," IEW - Working Papers 485, Institute for Empirical Research in Economics - University of Zurich.
    9. Frey, Bruno S. & Meier, Stephan, 2006. "The Economics of Museums," Handbook of the Economics of Art and Culture, Elsevier.
    10. Cellini, Roberto & Cuccia, Tiziana, 2017. "How free admittance affects charged visits to museums: An analysis of the Italian case," MPRA Paper 78067, University Library of Munich, Germany.

    More about this item

    Keywords

    cultural economics; grants; public prices; museums; principal- agent model;

    JEL classification:

    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
    • Z10 - Other Special Topics - - Cultural Economics - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wpa:wuwppe:0309002. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA). General contact details of provider: http://econwpa.repec.org .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.