Hello everyone, I was discussing this issue of whether to charge admissions fees or not with a friend of mine who has an MBA, and he wrote down some interesting thoughts. He gave me permission to share with you all, so I will paste them below. All the best, Travis Begin quote: Pricing is complex. In general any price that is above marginal cost (the cost to make one more unit) is profitable. However this model breaks down in many circumstances, for example if you have a business with very high fixed costs and very low marginal costs. For example, Airlines have high fixed costs, but the marginal cost of adding one more passenger (if there is an extra seat), is a can of coke, bag of peanuts and a tiny bit more fuel. So one might think that if airlines are pricing rationally, the airlines would reduce the price of plane tickets to 2 or 3 dollars right before takeoff as to fill all the seats. However, very cheep product does change consumer's perceptions of the product and it will change the way people value the flying. Museum admission seems like a similar scenario, the fixed costs are very high, but the marginal cost of letting one more person through the door is very low. I would imagine that there are several competing concerns when pricing museum entrance. Off the top of my head. 1. Even if you don't need it, money is good. 2. People have an irrational tendency to value their purchases. This is post-purchase rationalization, see http://en.wikipedia.org/wiki/List_of_cognitive_biases. 3. To maximize patron's enjoyment there is a non-zero optimal crowd for the museum. People probably do not want to be in an empty museum, nor do they want heavy crowds. Price can be used to control the number of people inside. 4. A cover charge keeps out people who are interested in being indoors, rather then interested in the exhibits. (mall-walkers, bathroom-users, bums, amorous young lovers, students looking for a place to study). In summary, it makes a lot of intuitive sense to me that a museum would want to have a small admission fee for purposes other then raising money. And there is a plethora of evidence showing that people rationalize their expenditures. I recall reading how there is a tendency for people who are somewhat neutral about a purchase before they make it become very sure of the decision afterward. Fundamentally, we all want to think that we are smart and make good decisions, if we spent $2 at a museum, we want to think we got a good deal. -- ================================== Travis Nygard [log in to unmask] http://www.travisnygard.com http://arthistorynewsletter.com/ ================================== ========================================================= Important Subscriber Information: The Museum-L FAQ file is located at http://www.finalchapter.com/museum-l-faq/ . You may obtain detailed information about the listserv commands by sending a one line e-mail message to [log in to unmask] . The body of the message should read "help" (without the quotes). If you decide to leave Museum-L, please send a one line e-mail message to [log in to unmask] . The body of the message should read "Signoff Museum-L" (without the quotes).