Optimal pricing and grant policies for museums |
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| Authors: | Juan Prieto-Rodríguez Víctor Fernández-Blanco |
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| Institution: | (1) Departamento de Economía, Universidad de Oviedo, Avenida del Cristo s/n, Oviedo, Spain |
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| 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.
JEL Classification number H20, H42, C70, D80, Z10 |
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| Keywords: | Grants Public valuation Public prices Museums Principal-agent model |
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