Costs of acquisitions, conservation, maintenance, staff salaries

Introduction.

Museums are expensive to run, with the costs of acquisitions, preservation, care, staff wages and particular exhibitions all weighing to a great extent upon their budgets. In many instances much of their support comes from the authorities, whether at national or local degree, with the balance made up through gifts, income from museum stores and other commercial ventures, private contributions and sponsorship, and, really frequently, through entry fees.

By for-profit criterions, museums are unlogical. Museums have a concern theoretical account with costs much greater than their grosss. In a non-profit organisation, an admittance fee wo n’t even get down to cover the costs of presenting its service. Museums have found assorted ways to increase their income chances, for illustration through gift stores and eating houses.

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Logically, take downing the admittance monetary value, would increase the sum of visitants, these visitants would pass more money in gift stores and eating houses and could perchance ensue in a higher income. On the other manus, a museum misses out on excess income through admittance fees.

Is there an equilibrium monetary value? And what are the alternate pricing options? The research inquiry in this paper is: Should museums bear down an admittance fee?

Literature on this issue provides this paper with a theoretical model, following I will research the effects of digitalisation for museums. A Dutch instance survey, done by Aarts de Jong Wilms Goudriaan Public Economics ( APE ) will finish the reply to this inquiry.

Museum economic sciences:

Museums have high fixed costs. This consequences in a high norm cost curve for museums. The demand curve frequently lies below this mean cost curve. This makes it impossible to put an entryway monetary value at which the sum sum of income received through admittance fees covers the costs of the museum. ( Frey, 2006 ; Caves,2000 ) However, admittance monetary values are of the chief determiners that influence the economic result of a museum. The economic value of a museum is frequently really high as a consequence of its aggregation and location. To increase gross nevertheless, museums do non merely depend on admittance fees but besides on the income that comes from museum gift stores, eating houses, and leasing possibilities. Additionally, museums receive a great trade of support, patronizing and contributions. For illustration, for Boijmans van Beuningen Museum Rotterdam merely 20 % of its entire gross is derived from direct grosss, while 80 % is derived from subsidies. For some Dutch museums nevertheless, gross derived from entryway fees can be up to 50 % ( Munster et al. 2008 ) . Most museums receive governmental or public support, for the authorities, their economic public presentation is of high involvement for policy shapers. In all instances, entryway fees prove to be a really of import determiner that influence the economic result of a museum. Questions about what function museums are playing, should play and will play in society, are today topics really much under treatment. Is the museum a depot for things and memories, a showground, a Centre for instruction, a resort area for faculty members, a palace for people with a suited habitus the manner Pierre Bourdieu describes it, or an establishment with an of import function to carry through in

people ‘s life and a far-reaching portion to keep in the development of a society?

In his article, ‘National Museums: To bear down or non to bear down? ‘ O’Hagan explains that the most of import map of a museum is educational. “ This map involves people educating and informing people refering their yesteryear and beginnings, and if finance licenses those of other peoples, through the artifacts of the museum, thereby lending to the formation of a sense of the state ‘s individuality and place in the universe. ” For instruction merely nevertheless, physical presence is non wholly necessary and particularly in the digital universe a museum is able to execute its educational function partially through the usage of Internet. With this educational map in head, bear downing an entryway fee would restrict certain groups of people in accessing the museum, and hence larning about its content.

For museums admittance fees maintain to be an of import determiner of its grosss hence museums use pricing options, such as monetary value favoritism. Price distinction occurs when a house charges a different monetary value to different groups of consumers for its service, for grounds non associated with costs. Students, kids and aged are frequently charged less than ‘normal ‘ grownup visitants. Merely a minority of visitants pays the full entryway monetary value. There is nevertheless one issue when looking at cultural organisations. The monetary value snap for cultural demand is instead low which means differentiating in monetary value does non ensue in a important alteration in demand. As a consequence of this by raising its entryway monetary value, a museum can bring forth a important addition in gross. Given the income of a consumer ( i.e. the disbursement bound ) , monetary values and single penchants result in a bundle of goods and services that best satisfy their single public-service corporation. This economic optimisation procedure leads to certain characteristics in which demand for different goods and services – such as visits to museums – depends on income and monetary values. Not merely the monetary value of the museum itself, but besides the monetary value of viing leisure activities and extra costs, such as traveling disbursals play an of import function in consumer behavior. However tourers are less likely to experience limited by the admittance fee. ( Frey et al. 2006 ) The influence of viing leisure options depends on the character of a museum ; For a museum that is extremely viing with other leisure options, the monetary value sensitiveness of the visit turns out to be higher. In contrast, ‘highbrow ‘ and alone museums show that their visitants are less sensitive to monetary value alterations. Blockbusters have besides shown to be really price-inelastic. ( Goudriaan et al, 2007 )

Peoples with higher incomes tend to be higher educated and more developed penchants for cultural activities ( Frey, 2006 ; Throsby 2001 ) Peoples who are accustomed to sing a museum to see, are non inclined to alter this behavior when their income lessenings or admittance fees increase. On the other manus, people who are non accustomed to a sing a museum are insensitive to the incentive free of decreased admittance are ought to give. ( Goudriaan et al, 2007 )

Digitalization allows museums to exhibit their aggregation online, this allows the museum to educate people online. Physical presence is no longer necessary to have instruction about the museums artefacts. This could potentially take down the sum of visitants come ining the museum. However, most museums gain great benefits from utilizing the digitalisation to their advantage, they educate and communicate with their visitants through the Internet.

To bear down or non to bear down?

Much has been written about the advantages and disadvantages of puting the admittance monetary value of a museum to zero ( O’Hagan 1995 ; Anderson 1998 ; Baily and Falconer 1998 ) . In for illustration the United Kingdom, national museums grant free entry to their visitants. More and more services have free entree, such as the Internet, newspapers, unauthorised downloading, public conveyance etc. As a consequence, free entree has gained popularity.

Free entree to museum has advantages, it enables wholly people to be able to see the museum without acquiring charged. This might pull a new and bigger audience to see the museum. In his article, Kirchberg ( 1998 ) found that income is the ruling characteristic act uponing the subjective significance of entryway fees as a barrier to sing museums. Peoples in lower societal categories experience admittance charges as a barrier about five times every bit much as higher sociological classed people. Increasing entryway fees increases grosss but harmonizing to Kirchberg, non merely decreases the figure of visitants but besides change the socio-economic composing of the attending. Distributing public assistance is chiefly the ground for subsidies, in the instance of museums the distribution statement does non truly keep up: surveies have shown that visitants to a museum normally come from higher societal categories. Peoples from higher societal categories can afford to pay an entryway fee, in pattern this means that subsidising admittance monetary values, does non reassign public assistance to take down societal categories. Another benefit of free entry to a museum is that is increases the sum of visitants. For a museum, a high figure of visitants frequently reflects cultural prestigiousness ( O’Hagan 1995 ) . In his article O’Hagan besides points out that givers prefer non-profit houses. With higher entryway fees, givers are less wiling to donate money or artifacts. The fringy costs of an extra visitant is zero, hence another statement for free entry to a museum is the efficiency statement: entryway fees should so besides be zero to fulfill efficiency ( Frey, 2010 ) . On the other manus, literature suggests that there are jobs in finding the costs of museum services ( Baily and Falconer 1998 ) . There are still costs in leting visitants into a edifice, they require security, warming, visible radiation and physical infinite ) .

Free entree besides has disadvantages. Harmonizing to Frey, efficiency is non attained if the respective museums get overcrowded and the quality of a visit decreases. This consequences in museums restricting visitants by heightening admittance limitations, such as necessitating visitants to put a reserve in progress. This raises the danger than tickets can be sold on the black market, a visit so cab still go a dearly-won experience. Visitors can besides believe that “ something that has no monetary value, has no value ” ensuing in a lessening in a museum ‘s entire gross. In his article Steiner ( 1997 ) calculates the impact of free entry for one twenty-four hours to the entire gross of a museum. His survey shows that the sum of extra visitants does non get the better of the loss of the admittance charges it would have on a normal twenty-four hours. Additionally, the crowd of people the museum attracted contributed to the loss of value of the exhibition.

Most of the museums that offer free entree, charges for entree to particular or blockbuster exhibitions. Another scheme for free museums to do visitants pay is inquiring for a contribution at the terminal of the visit. By making so, they museum captures the craft to pay signifier visitants ( O’Hagan 1995 ) . A visitant is non obliged to pay, but frequently willing to make so as they enjoyed the visit. The more hearty the visit, the more a visitant is willing to pay. This is besides a better distribution of public assistance, as the societal higher categories have to ability to pay more, and the lower societal categories have the ability to pay less. With free entryway taking to a higher sum of visitants, issue contribution can convey in important excess fiscal resources for a museum.

Monetary values can be differentiated to apportion the resources every bit expeditiously as possible. Harmonizing to Frey, when demand is low, monetary values should be kept near to nothing. When demand is high, monetary values can be higher to avoid overcrowding, This enables visitants with the highest willingness to pay to come in the museum. Peoples with a low monetary value snap should be charged higher monetary values than visitants with a high monetary value snap of demand. Finally, monetary value can be differentiated when visitants target a particular exhibition, normal aggregation should be priced lower.

Another option is to bear down local visitants less than foreign visitants or tourers as tourers have a significantly lower monetary value snap of demand than locals. Often, when sing a metropolis, sing the museum is a must, and the extra costs of entryway fee are frequently easy paid for. Another statement for entryway fees is that the excess benefits a visitants receives from traveling to a museum, added to for illustration the being value ( Frey, 2006 ) should be paid for. As pointed out before, monetary value snap of demand for cultural services is low, hence ticket monetary values may non be the best account for demand. O’Hagan finds that, when The Long Room of Trinity College Dublin stated on entry that admittance monetary values are required to better the quality of the visit, the sum of visitants raised.

Another discrepancy of entry fees is making a museum nine. A fixed part is required to go a member and receive free entry to the museum. For culturally active people, this is a good solution and frequently cheaper than paying full entryway fees. For a museum, it has the same advantages and disadvantages of free entryway but it raises grosss ( Frey, 2010 )

Problems with pricing is that it is frequently considered unjust. Sing the chief function of a museum is instruction, it should be free for everyone to see and go educated.

In his article, Frey proposes a whole new pricing mechanism for museum: the application of issue monetary values. Alternatively of bear downing visitants when they enter a museum, they are charged on issue. The sum of clip spent in the museum sets the issue monetary value. A disadvantage of this proposal is that the length of visit becomes a great portion of an economic computation. A major advantage is that the experience of the visit, is charged afterwards. If the experience was non fulfilling for the visitant, he/she would go forth early and pay a lower monetary value. Visitors pay for their usage of the installation, this raises efficiency. The monetary value system can see to be less unjust, because up to a certain point, people can put their ain monetary values. Frey besides opts for the first 20 proceedingss to be free of charge, so that people who usually would non see a museum, receive an inducement to remain merely for a short period, possibly they will return subsequently for a longer visit.

The Dutch instance survey

Aarts 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 extended research documents, they calculate the effects of free entrywaies fees.

Table 1: The quantitative effects of free entryway on all Dutch museums:

Extra visits ( x1000 )

Addition in visits ( % )

Entire costs

( x1mln. )

Entire cost per excess visit in Euro ‘s

Free entry to the full aggregation

5.867

30,0

98,9

17

Free entry every Sunday

416

2,1

23,4

56

Free entry one time every month on Sunday

183

0,9

6,0

33

Free entry during one working twenty-four hours per hebdomad

267

1,4

11,2

42

Free museum card for pupils

1.623

8,3

12,3

8

Free entry to general aggregation

5.207

26,6

81,9

16

Beginning: Ape

Table 1 shows that the effects on the figure of visits are most important when free entry is given to the full museum, including general aggregation and particular exhibitions, followed by free entry to the general aggregation merely. Both options besides bring in the highest overall costs for the museums, costs per excess visit are comparatively low because there is no existent displacement in the sum of visits from yearss on which visitants are charged, to yearss visitants are non charged an entryway monetary value. A hebdomadal free entry on Sunday raises the most costs for the museum because a displacement appears from yearss on which visitants are charged to yearss visitants are non charged any admittance fee. In all instances, the loss of entryway fees causes the greatest trade of costs for a museum.

Their research shows that free entry increases the figure of visits, but they province: “ we do non anticipate miracles to go on from taking entryway fees. ” The composing of visitants has proven to be really hard to alter.

In another research, done by APE they have calculated the monetary value snap of Dutch museums.

From 1984- 2005 admittance monetary values raised with 6,2 % per twelvemonth, this does non take to a important alteration in the umber of visits. They show that with a monetary value snap of -0,18 the museum sector has the lowest monetary value snap of all cultural sectors. With every 1 % addition in monetary value, visits cut down by 0,18 % . Harmonizing to the research this is a consequence of the fact that possible visitants value traveling disbursals and ingestion costs to be more of import than admittance monetary values. The monetary value of replacements is a major determiner for the figure of visits to a museum: when replacements raise their monetary values, the figure of visits to a museum additions and frailty versa.

Ape besides predicts monetary value sensitiveness for 2005- 2015:

Figure 1: Predictions for alterations in admittance monetary values 2005-2015

Beginning: Ape

The index shows that the figure of visits to a museum is improbable to be affected by an addition or a lessening in entryway monetary values.

Decision

Museums have high fixed costs. This consequences in a high norm cost curve for museums. The demand curve frequently lies below this mean cost curve. This makes it impossible to put an entryway monetary value at which the sum sum of income received through admittance fees covers the costs of the museum. However, admittance monetary values are of the chief determiners that influence the economic result of a museum. To increase gross nevertheless, museums do non merely depend on admittance fees but besides on the income that comes from museum gift stores, eating houses, and leasing possibilities. Additionally, museums receive a great trade of support, patronizing and contributions. Museums have different functions to carry through, educating is one of them, as is aggregation and researching. An of import end for many museums is making groups far from devouring civilization. Other ends are fiscal gross, preservation and deriving prestigiousness.

In this essay, assorted literature has been discussed offering different pricing options. The most of import 1s are free entry and efficiency admittance fees, which both have advantages and disadvantages. Free entry is likely to increase the figure of visitants, but museum visitants frequently come from higher socio-economic categories, which transfers the benefits from no entryway fee largely to these upper classed visitants alternatively of the societal lower categories as it is intended to.

The being value shows that museums radiate positive external effects for non-visitors, this consequence supports free entryway. However, the benefits for visitants are higher than for non-visitors.

Low monetary value snap for museums helps back up the statement for admittance fees. There are assorted pricing options. Standard pricing is considered to be unjust, as it does non see the willingness and ability to pay for visitants, sing the educating function, different groups of people should all be able to come in the museum. Monetary values need to be differentiated, leting aged, pupils and other groups to come in for a decreased monetary value to fit their ability to pay. Another option is to bear down local visitants less than foreign visitants or tourers as tourers have a significantly lower monetary value snap of demand than locals or the application of issue monetary values.

The instance survey by APE, shows that taking entryway fees merely consequences in a important addition in the figure of visitants when all Dutch museums would take their entryway fees. As a consequence of a low monetary value snap for museum visits, a alteration in monetary value does non significantly affect the demand for a museum.

These findings indicate that free entryway is non the best option for a museum to make many people. Price alterations do non impact the figure of visits that much, a museum is better of distinguishing it ‘s monetary value in a manner that lower socio-economic categories are still able to afford a visit if they decide to. Since higher socio-economic categories continue to be the most dominant visitants in a museum, an entryway fee will non likely diminish the figure of visits. Entrance fees can lend to a museums grosss and let a museum to bring forth excess income that can be spent on increasing the quality of the experience for visitants.

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