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Will Tourist Fees Raise Total Revenue at NYC Museums?

Saturday, April 29, 2017 9:09

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I am happy to see that the sophisticated NY Times Arts Section is filled with “elasticity of demand” hypotheses in this piece. The Metropolitan Museum of Art is “free” but has a suggested donation. To the deep surprise of non-economists, this isn’t yielding that much revenue. Apparently, there are free riders among us. Based on some statistical sampling, the museum believes that 66% of its visitors are from outside NYC. There is a proposal to charge this set of tourists. This raises “demand” issues. At a price of $20 per visit, what will be demand? How much revenue will be collected? Will donations to the museum decline as the museum transforms itself into being another tacky capitalist institution (like a movie theater or a NBA basketball arena) that actually charges people for entering. Recall Titmus’ thoughts about voluntary blood donations in a world where we start to pay people to give blood.

CROWDING OUT IN BLOOD DONATION: WAS TITMUSS RIGHT?

Authors

Abstract

In his seminal 1970 book, The Gift Relationship, Richard Titmuss argued that monetary compensation for donating blood might crowd out the supply of blood donors. To test this claim we carried out a field experiment with three different treatments. In the first treatment subjects were given the opportunity to become blood donors without any compensation. In the second treatment subjects received a payment of SEK 50 (about $7) for becoming blood donors, and in the third treatment subjects could choose between a SEK 50 payment and donating SEK 50 to charity. The results differ markedly between men and women. For men the supply of blood donors is not significantly different among the three experimental groups. For women there is a significant crowding-out effect. The supply of blood donors decreases by almost half when a monetary payment is introduced. There is also a significant effect of allowing individuals to donate the payment to charity, and this effect fully counteracts the crowding-out effect. (JEL: C93, D64, I18, Z13)

Source: http://greeneconomics.blogspot.com/2017/04/will-tourist-fees-raise-total-revenue.html

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