Demand elasticities for symphony orchestras

Abstract

Firms in the performing arts industries like firms in nonprofit industries in general provide an interesting and fruitful area of study by economists. Research in this area by economists has been directed toward explaining the behavior of nonprofits as maximizers of some utility function, determining the elements of that utility function, and deriving the welfare implications of the observed behavior. In general, theories advanced to explain the behavior of nonprofit performing arts firms postulate that they are output maximizers, quality maximizers, or that they maximize some combination of the two goals. The firm, therefore, makes decisions on price, quality, and presumably other variables, such as promotional expenses, and attempts to choose the combination of variables under its control that maximize its objective function subject, of course, to some budget constraint. Symphony orchestras, like firms in the performing arts in general, fall into the category of nonprofit firms. These orchestras rely on public subsidies, patron contributions, and ticket revenues as major sources of funding. The willingness of the patrons of the arts to donate constitutes a major source of revenue for symphony orchestras. These contributions are presumed to be at least partially a function of the quality of the program, the season subscription price, and promotional activities. Patrons may be motivated to donate to the arts for other reasons. Contributions allow ticket prices to be held at levels which allow individuals not otherwise able to