Should Museums Charge For Admissions Advantages Disadvantages Economics Essay

Should Museums Charge For Admissions Ad late wavetages Disadvantages Economics EssayMuseums ar expensive to run, with the be of acquisitions, preservation, maintenance, staff salaries and special testifyions all weighing heavily upon their bud take ins. In more an(prenominal) subjects more than of their funding comes from the government, whether at national or local level, with the deviation made up with endowments, income from museum shops and other commercial ventures, private donations and sponsorship, and, truly oft, through origination slants.By for-profit standards, museums ar illogical. Museums gravel a transmission line model with be ofttimestimes largeer than their revenues. In a non-profit organization, an gate put fee wont even begin to cover the be of delivering its service. Museums subscribe found various ways to extend their income opportunities, for example through exhibit shops and restaurants.Logically, tear downing the opening worth, would increase the tot of punishors, these visitors would spend more specie in gift shops and restaurants and could possibly result in a gamey income. On the other hand, a museum misses out on superfluous income through admission fees.Is there an equilibrium value? And what ar the alternative set options? The research question in this paper is Should museums charge an admission fee?Literature on this issue provides this paper with a theoretical framework, undermenti unitaryd I will explore the effects of digitalization for museums. A Dutch case study, done by Aarts de Jong Wilms Goudriaan Public Economics ( anthropoid) will ace the answer to this question.Museum economicalsMuseums require graduate(prenominal) fixed costs. This results in a high average cost arc for museums. The use up curve often lies below this average cost curve. This makes it unaccepted to set an exercise cost at which the total total of income get through admission fees covers the costs of the museum. (Frey, 2006 Caves,2000) However, admission harms argon of the main determinants that act the economic outcome of a museum. The economic value of a museum is often very high as a result of its assembly and location. To increase revenue however, museums do non only depend on admission fees still similarly on the income that comes from museum gift shops, restaurants, and renting possibilities. Additionally, museums receive a great deal of support, sponsoring and donations. For example, for Boijmans van Beuningen Museum Rotterdam only 20% of its total revenue is derived from direct revenues, while 80% is derived from subsidies. For some Dutch museums however, revenue derived from entre fees tolerate be up to 50% (Munster et al. 2008). Most museums receive governmental or public support, for the government, their economic causeance is of high interest for policy makers. In all cases, accounting entre fees prove to be a very all-important(prenominal) determinant t hat influence the economic outcome of a museum. Questions about what role museums are fiting, should play and will play in society, are today subjects very much under discussion. Is the museum a storehouse for things and memories, a showground, a centre for education, a playground for academics, a castle for peck with a suitable material body the way Pierre Bourdieu describes it, or an institution with an important role to pull through inpeoples life and a far-reaching part to maintain in the ontogeny of a society?In his article, National Museums To charge or non to charge? OHagan explains that the around important right of a museum is educational. This function involves people educating and informing people concerning their past and origins, and if finance permits those of other peoples, through the artefacts of the museum, thereby contri besidesing to the formation of a sense of the countrys identity and position in the world. For education only however, physical presence is not entirely infallible and especially in the digital world a museum is able to perform its educational role partly through the use of Internet. With this educational function in mind, charging an entrance fee would limit certain groups of people in approaching the museum, and then learning about its content.For museums admission fees maintain to be an important determinant of its revenues therefore museums use set options, such(prenominal) as cost discrimination. Price oppositeiation occurs when a firm charges a different hurt to different groups of consumers for its service, for reasons not associated with costs. Students, children and elderly are often supercharged slight than normal adult visitors. Only a minority of visitors allowances the full entrance legal injury. There is however one issue when looking at heathen organizations. The hurt press stud for pagan demand is rather low which nitty-gritty differentiating in price does not result in a epochal kin d in demand. As a result of this by aggrandizement its entrance price, a museum apprize vex a signifi passelt increase in revenue. Given the income of a consumer (i.e. the spending limit), prices and individual preferences result in a package of goods and serve that scoop satisfy their individual utility. This economic optimization process leads to certain features in which demand for different goods and services such as visits to museums depends on income and prices. Not only the price of the museum itself, further also the price of competing unemployed activities and additional costs, such as travel expenses play an important role in consumer behaviour. However tourists are slight likely to feel limited by the admission fee. (Frey et al. 2006) The influence of competing untenanted alternatives depends on the character of a museum For a museum that is highly competing with other leisure alternatives, the price sensitivity of the visit turns out to be higher(prenominal). In contrast, intellectual and unique museums show that their visitors are less sensitive to price flip-flops. Blockbusters have also shown to be very price-inelastic. (Goudriaan et al, 2007)People with higher incomes tend to be higher traild and more developed preferences for ethnic activities (Frey, 2006 Throsby 2001) People who are accustomed to see a museum to visit, are not inclined to change this behaviour when their income decreases or admission fees increase. On the other hand, people who are not accustomed to a visiting a museum are insensitive to the incentive big of reduced admission are ought to give. (Goudriaan et al, 2007)Digitalization allows museums to exhibit their collection online, this allows the museum to educate people online. Physical presence is no interminable necessary to receive education about the museums artefacts. This could potentially visit the amount of visitors entering the museum. However, close to museums gain great avails from using the digitalization to their advantage, they educate and communicate with their visitors through the Internet.To charge or not to charge? a lot has been written about the advantages and disadvantages of setting the admission price of a museum to aught (OHagan 1995 Anderson 1998 Baily and Falconer 1998). In for example the United Kingdom, national museums grant clean-handed intro to their visitors. More and more services have unaffectionate access, such as the Internet, newspapers, unauthorized downloading, public transport etc. As a result, unaffectionate access has gained popularity.Free access to museum has advantages, it enables all people to be able to visit the museum without getting charged. This might attract a new and bigger audience to experience the museum. In his article, Kirchberg (1998) found that income is the dominating trace influencing the subjective signifi micklece of entrance fees as a barrier to visiting museums. People in lower social classes experience admis sion charges as a barrier almost five times as much as higher sociological classed people. Increasing entrance fees increases revenues but consort to Kirchberg, not only decreases the routine of visitors but also change the socio-economic study of the attendance. Distributing welfare is mainly the reason for subsidies, in the case of museums the statistical distribution production line does not acceptedly hold up studies have shown that visitors to a museum normally come from higher social classes. People from higher social classes can afford to acquit an entrance fee, in practice this means that subsidizing admission prices, does not transfer welfare to lower social classes. Another benefit of leave office entry to a museum is that is increases the amount of visitors. For a museum, a high rate of visitors often reflects cultural prestige (OHagan 1995). In his article OHagan also points out that donors prefer non-profit firms. With higher entrance fees, donors are less wilin g to give money or artefacts. The marginal costs of an additional visitor is zero, therefore another account for let go of entry to a museum is the faculty motive entrance fees should then also be zero to satisfy efficiency (Frey, 2010). On the other hand, literature suggests that there are problems in find the costs of museum services (Baily and Falconer 1998). There are still costs in allowing visitors into a building, they require security, heating, light and physical space).Free access also has disadvantages. concord to Frey, efficiency is not attained if the respective museums get overcrowded and the tone of voice of a visit decreases. This results in museums limiting visitors by enhancing admission restrictions, such as requiring visitors to place a reservation in advance. This raises the peril than tickets can be sold on the black market, a visit then cab still become a costly experience. Visitors can also think that something that has no price, has no value resulting in a decrease in a museums total revenue. In his article Steiner (1997) draw a bead ons the shock absorber of free entry for one day to the total revenue of a museum. His study shows that the amount of additional visitors does not overcome the deviation of the admission charges it would receive on a normal day. Additionally, the crowd of people the museum attracted contributed to the loss of value of the exhibition.Most of the museums that offer free access, charges for access to special or blockbuster exhibitions. Another strategy for free museums to make visitors pay is intercommunicate for a donation at the end of the visit. By doing so, they museum captures the wiliness to pay form visitors (OHagan 1995). A visitor is not obliged to pay, but often willing to do so as they enjoyed the visit. The more satisfying the visit, the more a visitor is willing to pay. This is also a better distribution of welfare, as the social higher classes have to capability to pay more, and the lower social classes have the ability to pay less. With free entrance hint to a higher amount of visitors, subject donation can put to work in significant especial(a) financial resources for a museum.Prices can be differentiated to allocate the resources as efficiently as possible. According to Frey, when demand is low, prices should be kept close to zero. When demand is high, prices can be higher to avoid overcrowding, This enables visitors with the highest willingness to pay to enter the museum. People with a low price elasticity should be charged higher prices than visitors with a high price elasticity of demand. Finally, price can be differentiated when visitors target a special exhibition, normal collection should be priced lower.Another option is to charge local visitors less than foreign visitors or tourists as tourists have a significantly lower price elasticity of demand than locals. Often, when visiting a city, visiting the museum is a must, and the additional costs of entrance fee are often easily paid for. Another argument for entrance fees is that the extra benefits a visitors receives from going to a museum, added to for example the existence value (Frey, 2006) should be paid for. As pointed out before, price elasticity of demand for cultural services is low, therefore ticket prices may not be the best explanation for demand. OHagan finds that, when The Long Room of Trinity College Dublin stated on entry that admission prices are required to improve the quality of the visit, the amount of visitors raised.Another variant of entry fees is creating a museum club. A fixed section is required to become a member and receive free entry to the museum. For culturally active people, this is a good solution and often cheaper than paying full entrance fees. For a museum, it has the same advantages and disadvantages of free entrance but it raises revenues (Frey, 2010)Problems with set is that it is often considered unfair. Considering the main role of a museum is education, it should be free for everyone to visit and become educated.In his article, Frey proposes a whole new pricing mechanism for museum the application of exit prices. Instead of charging visitors when they enter a museum, they are charged on exit. The amount of time spent in the museum sets the exit price. A disadvantage of this proposal is that the length of visit becomes a great part of an economic calculation. A major advantage is that the experience of the visit, is charged afterwards. If the experience was not satisfying for the visitor, he/she would leave early and pay a lower price. Visitors pay for their use of the facility, this raises efficiency. The price system can considered to be less unfair, because up to a certain point, people can set their own prices. Frey also opts for the first 20 minutes to be free of charge, so that people who normally would not visit a museum, receive an incentive to stay only for a short period, possibly they will return later for a longer visit.The Dutch case studyAarts de Jong Wilms Goudriaan Public Economics (APE) has been commissioned by the ministry to research the possibilities for free entry for Dutch museums. In several extensive research papers, they calculate the effects of free entrances fees.Table 1 The quantitative effects of free entrance on all Dutch museumsAdditional visits (x1000)Increase in visits (%)Total costs(x1mln.)Total cost per extra visit in EurosFree entry to the entire collection5.86730,098,917Free entry every Sunday4162,123,456Free entry once every month on Sunday1830,96,033Free entry during one working day per week2671,411,242Free museum card for students1.6238,312,38Free entry to general collection5.20726,681,916Source APETable 1 shows that the effects on the figure of speech of visits are most significant when free entry is given to the entire museum, including general collection and special exhibitions, followed by free entry to the general collection only. both(pre nominal) options also bring in the highest overall costs for the museums, costs per extra visit are relatively low because there is no real sacque in the amount of visits from geezerhood on which visitors are charged, to days visitors are not charged an entrance price. A weekly free entry on Sunday raises the most costs for the museum because a shift appears from days on which visitors are charged to days visitors are not charged any admission fee. In all cases, the loss of entrance fees causes the greatest deal of costs for a museum.Their research shows that free entry increases the go of visits, but they state we do not expect miracles to come from removing entrance fees. The composition of visitors has proven to be very difficult to change.In another research, done by APE they have calculated the price elasticity of Dutch museums.From 1984- 2005 admission prices raised with 6,2% per year, this does not lead to a significant change in the umber of visits. They show that with a price elasticity of -0,18 the museum sector has the lowest price elasticity of all cultural sectors. With every 1% increase in price, visits reduce by 0,18%. According to the research this is a result of the fact that potential visitors value travelling expenses and consumption costs to be more important than admission prices. The price of substitutes is a major determinant for the number of visits to a museum when substitutes raise their prices, the number of visits to a museum increases and vice versa.Ape also predicts price sensitivity for 2005- 2015 interpret 1 Predictions for changes in admission prices 2005-2015Source APEThe index shows that the number of visits to a museum is unlikely to be affected by an increase or a decrease in entrance prices.ConclusionMuseums have high fixed costs. This results in a high average cost curve for museums. The demand curve often lies below this average cost curve. This makes it impossible to set an entrance price at which the total amount of income received through admission fees covers the costs of the museum. However, admission prices are of the main determinants that influence the economic outcome of a museum. To increase revenue however, museums do not only depend on admission fees but also on the income that comes from museum gift shops, restaurants, and renting possibilities. Additionally, museums receive a great deal of support, sponsoring and donations. Museums have different roles to fulfil, educating is one of them, as is collection and researching. An important goal for many museums is reaching groups far from consuming culture. Other goals are financial revenue, conservation and gaining prestige.In this essay, various literature has been discussed offering different pricing options. The most important ones are free entry and efficiency admission fees, which both have advantages and disadvantages. Free entry is likely to increase the number of visitors, but museum visitors often come from higher socio-econ omic classes, which transfers the benefits from no entrance fee more often than not to these upper classed visitors instead of the social lower classes as it is intended to.The existence value shows that museums radiate positive external effects for non-visitors, this effect supports free entrance. However, the benefits for visitors are higher than for non-visitors.Low price elasticity for museums helps support the argument for admission fees. There are various pricing options. Standard pricing is considered to be unfair, as it does not consider the willingness and ability to pay for visitors, considering the educating role, different groups of people should all be able to enter the museum. Prices need to be differentiated, allowing elderly, students and other groups to enter for a reduced price to match their ability to pay. Another option is to charge local visitors less than foreign visitors or tourists as tourists have a significantly lower price elasticity of demand than local s or the application of exit prices.The case study by APE, shows that removing entrance fees only results in a significant increase in the number of visitors when all Dutch museums would remove their entrance fees. As a result of a low price elasticity for museum visits, a change in price does not significantly affect the demand for a museum.These findings indicate that free entrance is not the best option for a museum to reach many people. Price changes do not affect the number of visits that much, a museum is better of differentiating its price in a way that lower socio-economic classes are still able to afford a visit if they shape to. Since higher socio-economic classes continue to be the most dominant visitors in a museum, an entrance fee will not likely decrease the number of visits. Entrance fees can contribute to a museums revenues and allow a museum to generate extra income that can be spent on increasing the quality of the experience for visitors.