Museum Visitation under Charged and Free Admission - An Analysis of Vertical Product Differentiation

Abstract: The issue of museum entrance fees is widely debated. Traditionally, it has been commonly agreed that museums should be free, however nowadays charged admission is the norm. Although economic analysis is a relevant tool in order to understand the impact of a given admission policy on museum demand the notion of congestion has been previously overlooked. In this essay, I analyze how museum visitation is impacted by different admission policies with respect to congestion. Three admission policies are analyzed. First, the case of both days of free admission and days of charged admission. Second, the case of only charged admission. Third, the case of only free admission. I find that in general, as long as at least one group of visitors pays for admission, a profit-maximizing museum will have economic incentives to provide visits to all types of visitors. In essence, the entire market will be served. However, due to the nature of the museum product, the exact levels of the quantity sold, the quality supplied and the consumer surplus potentially enjoyed cannot be calculated within the scope of the model. For this purpose, a model which takes into account the relationship between quantity and quality is required.