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Working paper

Demand for performing arts: the effect of unobserved quality on price elasticity

Working papers. AWP. ACEI, 2016. No. 05 - 2016.
Ozhegova A., Ozhegov E. M.
This paper studies the behavior patterns among the theatre’s attendants in the process of ticket’s purchase. Since the theatre attempts to balance between the high rate of occupancy and the affordable prices for the spectator, the purpose of the study is to reveal the effects of changes in prices on attendance rate on different levels of attendance. This project is conducted conjointly with the Perm Tchaikovsky Opera and Ballet Theater. Data is taken from the sales information system of the theater for four seasons 2011-2012/2014-2015. The data is disaggregated to the level of the seating area and performance and consists of the attendance rate, the set of prices and the performance characteristics. The research explores the determinants of demand using censored quantile regression that accounts for the heterogeneity of effects on different levels of attendance rates and censoring. We have estimated the parameters of demand function and revealed that the aggregated demand is elastic by price, at the same time the elasticity varies across different seating areas. Moreover, demand for the more popular seats and performances expectedly turns out to be the less elastic.