My post staking a claim that $25 to visit the Metropolitan Museum of Art was not expensive generated some comments. There are two issues at play here, not entirely separable: first, that compared to other genres of art, high and low, $25 to see what is one of the world's greatest collections of art is not widely at odds with what one pays elsewhere, and in fact might even be somewhat less, and, second, regardless of the price compared to other genres, ought the Museum to charge a price as high as $25? The focus of my post was on the first … [Read more...]
Museums are not expensive
New York's Metropolitan Museum of Art is being sued for strongly suggesting that its "recommended" donation for entry is in fact required of visitors. Associated Press reports: 'The museum was designed to be open to everyone, without regard to their financial circumstances,' said Arnold Weiss, one of two attorneys who filed the lawsuit on behalf of three museum-goers, a New Yorker and two tourists from the Czech Republic. 'But instead, the museum has been converted into an elite tourist attraction.' In the New York Daily News, James Panero … [Read more...]
On Google, and why price discrimination is good for consumers
Paul Krugman writes about the decision by Google to shut down Google Reader. Whatever your thoughts on the good or evil nature of Google, he raises an important issue for thinking about price discrimination: there are cases where, if no price discrimination is possible, such that the seller can only charge one price to all, there does not exist a price that can possibly allow the firm to cover its costs. And this is true even if the total value consumers place on the good (as measured by their reservation prices - their willingness to pay for … [Read more...]
How two-part pricing works
In the previous post we set out the basic idea behind price discrimination: your potential audience has different maximum prices they are willing to pay for what you have on offer (their "reservation prices") and you want to find a way to get individuals to pay something close to their personal maximum, so long as it covers their marginal cost to you. Two-part pricing is a type of indirect price discrimination: everyone is offered the same deal when it comes to prices, and they choose options that reveal whether they have high or low … [Read more...]
A primer on price discrimination
My previous two posts dealt with different aspects of price discrimination, and since many future posts will cover the topic from various angles, I think it worthwhile to go over a few basic ideas and definitions. Marginal cost will be defined here as the cost to your arts organization of serving one more customer. It might be one more person through the turnstiles of your museum, one more person taking a seat for your performance or festival. For the examples just given, marginal cost might be very close to zero - it costs nothing at all to … [Read more...]
Voluntary price discrimination is not a new idea
Alyssa Rosenberg on crowdsourcing new movies: One thing that’s striking about the Veronica Mars Kickstarter is that you have to give at least $35, more than four times the cost of the average American movie ticket in 2012, to get a digital download of the movie. You have to give $750 to get a ticket to the premiere of the film in Los Angeles. An Andrew Sullivan reader says: What I find particularly brilliant about the Rob Thomas/Veronica Mars Kickstarter project is that the producers of a good have found a way to exploit certain consumers’ … [Read more...]
Discounts for the price-conscious well-informed consumer
A little more than a year ago, J.C. Penney's new management announced a change to its pricing strategy, in an effort to turnaround the troubled store - get rid of "nonstop promotions" and move to a simpler pricing structure. In the current issue of the New Yorker, James Surowiecki tells of the resulting fail: The biggest problem with [J.C. Penney CEO Ron] Johnson’s strategy is simple: he misread what Penney’s customers wanted. Doing away with constant markdowns was, on the face of it, sensible: instead of starting with a high price and quickly … [Read more...]
Self-publishing and the theology of free
Artsjournal.com links today to a story from Publishers Weekly at SXSW on self-publishing and the "theology of free." But what exactly is this theology? Called Self-Publishing in the Age of E, Deahl’s panel featured bestselling self (and now conventionally) published novelist Hugh Howey, author of the bestselling sci-fi series Wool, Erin Brown, a former St. Martin’s and HarperCollins editor and now an Austin based freelance editor, and literary agent Kirby Kim of William Morris Endeavor. It didn’t take long to get to core issues around … [Read more...]
Will the ACA cause prices to rise?
At Slate, Matthew Yglesias takes apart the argument by a Five Guys hamburger franchise owner that the Affordable Care Act (ACA, or "Obamacare"), with its requirements on employee health insurance, will drive up his prices. Yglesias says: no, if it makes sense to increase prices in light of potential increased profits, then that is so whether or not there are increased health insurance costs on the employer. Instead, he argues, the increased costs will simply cut into firm profits. Is that correct? Not quite. It is worth considering in a bit … [Read more...]
Tips, Charities and Businesses
This blog holds that arts managers can learn interesting things about pricing from non-arts businesses, and today I want to look at pricing of internet content. Preparation and presentation of content is not costless, and has to be financed somehow. It might be financed by the content provider herself, happy to do the work of writing a blog with no expectation of financial reward for the activity. Or it might be financed through bringing viewers to advertisers, or through a "tip jar", or through charging for full access to content, with only … [Read more...]