Revenue and attendance simultaneous optimization in performing arts organizations

• Published in: Journal of cultural economics Vol. 42; no. 4; pp. 677 - 700
• Main Authors: Baldin, Andrea, Bille, Trine, Ellero, Andrea, Favaretto, Daniela
• Format: Journal Article
• Language: English
• Published: New York Springer Science + Business Media 01-11-2018; Springer US; Springer Nature B.V
• Subjects: Arts; Attendance; Cultural Economics; Customers; Decision making models; Economic models; Economic Policy; Economics; Economics and Finance; Incentives; Microeconomics; Music; Optimization; ORIGINAL ARTICLE; Performing arts; Prices; Pricing policies; Regional and Cultural Studies; Revenue; Seating; Theater; Denmark; Theater demand; C35; Pricing; Multi-objective optimization; Seat allocation; Z11; L11; Multinomial logit model; C61
• ISSN: 0885-2545; 1573-6997
• DOI: 10.1007/s10824-018-9323-7

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.