Revenue and attendance simultaneous optimization in performing arts organizations

Abstract

Performing arts organizations are characterized by different objectives other than revenue. Even if, on the one hand, theaters aim to increase revenue from box office as a consequence of the systematic reduction in public funds; on the other hand, they pursue the objective to increase its attendance. A common practice by theaters is to provide incentives to customers to discriminate among themselves according to their reservation price, offering a schedule of different prices corresponding to different seats in the venue. In this context, price and allocation of the theater seating area is decision variables that allow theater managers to manage their two conflicting goals to be pursued. In this paper, we introduce a multi-objective optimization model that jointly considers pricing and seat allocation. The framework proposed integrates a choice model estimated by multinomial logit model and the demand forecast, taking into account the impact of heterogeneity among customer categories in both choice and demand. The proposed model is validated with booking data referring to the Royal Danish theater during the period 2010–2015.

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Fig. 1

Source: https://kglteater.dk/en/

Fig. 2

Source: https://wwwnimbus.it.jyu.fi/

Fig. 3
Fig. 4

Notes

  1. 1.

    This framework holds also for our case study: the Royal Danish theater. According to the National Danish Statistics (http://www.statbank.dk), the public subsidy to the Royal Danish theater decreases from 608,675 Danish crowns in the 2011/2012 season, to 573,900 Danish crowns in the 2014/2015 season.

  2. 2.

    We are aware that a potential problem of partial endogeneity may exist, as the variation of price also reflects different quality factors not explained by the model. However, the main sources of price variation are represented by factors included in the demand estimation, such as time and day of the performance, if the performance is run for the first time at the Royal Danish theater, and so on.

  3. 3.

    CPI data are collected by Statistics Denmark: http://www.dst.dk/en.

  4. 4.

    We collect these data through “Operabase,” a website designed to collect statistics about operatic activity worldwide: http://operabase.com.

  5. 5.

    https://wwwnimbus.it.jyu.fi.

  6. 6.

    Price is expressed in Danish crown (DKK): \(1\, {\hbox {DKK}} \approx 0.13 e\).

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Correspondence to Andrea Baldin.

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Baldin, A., Bille, T., Ellero, A. et al. Revenue and attendance simultaneous optimization in performing arts organizations. J Cult Econ 42, 677–700 (2018). https://doi.org/10.1007/s10824-018-9323-7

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Keywords

  • Multi-objective optimization
  • Pricing
  • Seat allocation
  • Multinomial logit model
  • Theater demand

JEL Classification

  • C35
  • C61
  • L11
  • Z11