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Title: Econometric Analysis of Adopting Dual Princing for Museums: The Case of the National Museum of Iran
Authors: Sharifi‐Tehrani Mohammad, Verbič Miroslav, Chung Jin Young The final version of this preprint (working paper) was published in an article entitled An Analysis of Adopting Dual Pricing for Museums: The Case of the National Museum of Iran in the journal Annals of Tourism Research. DOI: http://dx.doi.org/10.1016/j.annals.2013.04.001 Suggested citation: Sharifi‐Tehrani Mohammad, Verbič Miroslav, Chung Jin Young: An Analysis of Adopting Dual Pricing for Museums: The Case of the National Museum of Iran. Annals of Tourism Research, 43(2013), pp. 58‐80.
ECONOMETRIC ANALYSIS OF
ADOPTING DUAL PRICING FOR
MUSEUMS:
THE CASE OF THE NATIONAL
MUSEUM OF IRAN
Mohammad Sharifi Tehrani
Miroslav Verbič
Jin Young Chung
WORKING PAPER No. 63, 2012
Ljubljana, June 2012
Econometric Analysis of Adopting Dual Pricing for Museums: The Case of the National Museum of Iran .
Mohammad Sharifi Tehrani1, Miroslav Verbič
2, Jin Young Chung
3
Number of copies – 50 pieces
WORKING PAPER No. 63, 2012
Editor of the WP series: Boris Majcen
CIP - Kataložni zapis o publikaciji
Narodna in univerzitetna knjižnica, Ljubljana
330.4:069(55)
SHARIFI Tehrani, Mohammad
Econometric analysis of adopting dual princing for museums : the case of the National
Museum of Iran / Mohammad Sharifi Tehrani, Miroslav Verbič, Jin Young Chung. -
Ljubljana : Inštitut za ekonomska raziskovanja = Institute for Economic Research, 2012. -
(Working paper / Inštitut za ekonomska raziskovanja, ISSN 1581-8063 ; no. 63)
ISBN 978-961-6543-98-9
1. Verbič, Miroslav 2. Chung, Jin Young
262201088
1 Department of Tourism Management, Faculty of Management and Accounting, Allameh Tabataba’i University,
Tehran, Iran. 2 Faculty of Economics, University of Ljubljana, Slovenia & Institute for Economic Research, Ljubljana,
Slovenia. 3 Department of Recreation Management and Therapeutic Recreation, University of Wisconsin – La Crosse, La
Crosse, USA.
Printed by Institute for Economic Research – IER
Copyright retained by the authors.
Published by Institute for Economic Research in June, 2012
Abstract
Dual pricing refers to the practice of setting prices, whereby foreign visitors are asked to pay
higher fees than domestic visitors. The purposes of this article are to estimate the admission
fees that foreign and domestic visitors are willing to pay, respectively, for the National
Museum of Iran, and also to examine the relationship between the visitors’ willingness-to-pay
and their various socio-economic, geographical, any psychological characteristics. It was
established that the two segments of visitors differ substantially, both in their characteristics
and in their behaviour. The entrance fees that foreign visitors are willing to pay are
substantially higher than the current single entrance fee, while domestic visitors’ willingness-
to-pay is not significantly different from the current entrance fee. The findings, if applied with
caution, could provide museum managers with the rationale for adopting dual pricing and
with practical directions for setting such schemes.
Key words: Attitude; Contingent valuation method; Dual pricing; Involvement; Museum
entrance fees; Willingness-to-pay.
JEL classification: C51, D01, Z11.
1
1 Introduction
Museums are a main heritage tourism attraction in many countries and in some
instances, they play a considerable role in determining the image of destinations (Gil &
Ritchie, 2009). Museums can raise the awareness of tourists and local populations on
their cultural identity, history and the environment and help to protect them for future
generations, thereby contributing to the sustainable development of tourism (ICOM,
2007). To achieve these aims, though many factors seems to be involved, it is critical
for museums to acquire sufficient funds through internal and external organizational
resources, a process that tends to rely on a public-private collaboration system due to
their neither entirely public nor entirely private nature (Sanz, Herrero, & Bedate, 2003).
Nonetheless, it has still been believed that the government is the main funding
provider for museums. Indeed, the average allocation of government funding has been
greater than the total of a museum’s self-generated income (Gilmore & Rentschler,
2002; Kotler, Kotler, & Kotler, 2008). Of notable significance over time is a change in
this notion, as the government support for museums is reportedly declining (Jaffry &
Apostolakis, 2011; Luksetich & Partridge, 1997). Subsequently, this change highlights
the importance of other financial resources and draws attention to innovative ways to
cover operating costs. Museums in the United States are relevant examples of
demonstrating this change in that they are less likely to depend on direct public grants
(Kotler et al., 2008). Namely, government support for museums in the United States
accounts for only 13% to 33% of each museum’s total budget (Manjarrez, Rosenstein,
Colgan, & Pastore, 2008).
Museums in the developing world have far greater difficulty attaining sufficient
funds compared to those in the developed countries. In some developing countries, a
majority of museum visitors are foreign tourists, while nationals make up only a small
number of visitors (Boyan, 2006). Furthermore, due to recession or lack of interest in
the cultural industry, a government tends not to assign the necessary funds to the
museum industry. Such a situation has induced museum managers to expand their
portfolio of financial resources for long-term survival, and encouraged them to employ
their current resources efficiently. In this regard, discriminatory pricing for the different
segmentations of visitors has taken on great importance as a way to maximize museum
revenue (i.e., revenue management).
Discriminatory pricing refers to introduction of the same products with different
prices to separate groups of customers, who are prepared to pay different prices
(Vanhove, 2005). Its benefits have also been empirically analyzed in some museum
literature (cf. Prieto-Rodriguez &Fernandez-Blanco, 2006). Discriminatory pricing leads
to various types of pricing practices, including dynamic pricing (pricing that can change
quickly on the Internet), yield pricing (pricing that changes based on predicted demand;
usually applied to airfares) and dual pricing (one group of customers is asked to pay
higher prices than others).
In particular, a dual-pricing practice has sometimes been considered in the
museums of developing countries; i.e. foreign visitors are asked to pay higher entrance
fees than domestic visitors (Timothy & Nyaupane, 2009). This notion is based on
different price elasticities of demand between the categories of visitors from different
locations (Frey & Steiner, 2010), and it is called segment-based pricing (Ng, 2008;
Tasci, Gurbuz, & Gartner, 2006). The rationale for imposing dual pricing for heritage
attractions like museums in developing countries mainly results from the beliefs that
2
tourists from developed countries have higher household incomes than residents,
tourists do not pay local taxes (Howard, 2009), and that it could allow residents with
marginal income easy access to such attractions (Timothy & Nyaupane, 2009).
The purpose of this article is twofold. First, to estimate the admission fees that
foreign and domestic visitors are willing to pay, respectively, for the National Museum
of Iran. This would provide empirical evidence and primary information as to whether
introducing dual admission fees would be feasible. The fundamental hypothesis of our
article is that foreign visitors are willing to pay higher entrance fees than domestic
visitors to the National Museum of Iran. Setting the admission fee at the appropriate
level would be challenging, as some studies have found that the fee could hinder low-
income citizens’ participation in recreational or cultural activities (More and Stevens,
2000; Schneider & Budruk, 1999). In this respect, the findings could provide museum
managers with the rationale of adopting dual pricing and with practical directions of
setting appropriate prices for different market segments of visitors. Thus, the current
article could contribute to the research about this emerging pricing strategy in the
museum industry.
The second purpose of the article is to understand the relationship between the
visitors’ willingness-to-pay (WTP) for museum admission fees and their various socio-
economic, geographical, and psychological characteristics. To this end, a relatively solid
theoretical framework is based for econometric estimation of the relationships between
the WTP and its various determinants. Specifically, we test the hypotheses of positive
relationships between the WTP and the socio-economic characteristics of visitors, their
attitudes towards museums, involvement in the museum experience, and distance
travelled.
We claim that foreign visitors to the National Museum of Iran exhibit different
“behaviour” in all these respects in comparison to domestic visitors, and that this
different behaviour is a further justification for adopting dual pricing, along with the
discrepancy between their income levels. More precisely, even though most tourism
managers in Iran regard the higher income of foreign visitors as the only justification
for adopting dual pricing, we argue that due to more culturally focused motivation of
inbound tourists to Iran they are willing to pay higher prices for the museum entrance
fee, compared to domestic visitors. Culturally focused motivation of travelling tend to
classify inbound tourists to Iran as a “professional segment” of the market that has on
average a finer attitude towards museums and is more involved in the museum
experience than domestic visitors. In addition, they traverse a greater distance to arrive
to the museum. These characteristics increase the WTP and thus may give further
justification for adopting dual pricing for admission to the National Museums of Iran.
Additionally, we shall study whether visitors’ attitudes and involvement are dependent
on their socio-economic and geographical characteristics.
Methodologically, the contingent valuation method (CVM) with eliminated protest
responses is employed as a means of quantifying public preferences and measuring
willingness-to-pay for admission to the National Museum of Iran. Contingent valuation
surveys were first proposed in theory by Ciriacy-Wantrup (1947) as a method for
eliciting market valuation of a non-market good. The first practical application of the
technique was done by Davis (1963) on the economic value of recreation in the Maine
woods. Numerous applications of the method to various public goods and studies of its
methodological properties were conducted worldwide in the 1970’s and 1980’s. Even
though the CVM has been initially and most frequently applied in the field of
3
environmental economics (cf. Kinghorn & Willis, 2008; Snowball, 2008;
Venkatachalam, 2004), it is being increasingly used to estimate cultural values
(Noonan, 2003; Tuan and Navrud, 2008). Although several studies have recently used
the CVM to investigate a visitor’s willingness-to-pay for admission to a museum (cf.
Bedate, Herrero & Sanz, 2009; Borda, 2007; Lampi & Orth, 2009; Plaza, 2010;
Santagata & Signorello, 2000; Sanz, Herrero, & Bedate, 2003; Tohmo, 2004), we are
not aware of comprehensive studies using the CVM to adopt a dual pricing system for a
museum, especially for the developing countries.
The outline of the article is as follows. In Chapter 2, the argumentation of entry fees
for a museum is given and the variables affecting the willingness-to-pay are derived. In
Chapter 3, the case of the National Museum of Iran is presented in brief. In Chapter 4,
the contingent valuation method is outlined, with a theoretical framework for
econometric estimation of willingness-to-pay for admission to a museum. Additionally,
the questionnaire and the data are presented, with some of the issues that arose during
the conduct of the study. Chapter 5 presents the empirical results; the descriptive
statistics with unconditional willingness-to-pay on one hand and the results of
(conditional) econometric estimation of willingness-to-pay on the other. The article
concludes in Chapter 6 with the key findings of the analysis and some suggestions
regarding the adoption of dual pricing for a museum.
2 Entrance fees to a museum and variables affecting the willingness-to-pay
2.1 Argumentation of entrance fees to a museum
The essence of introducing admission fees to public museums has been controversial
and extensively discussed (Anderson, 1998; Lampi & Orth, 2009). On one hand, some
researchers, including Peacock (1994), O’Hagan (1995), Bailey and Falconer (1998) are
in favour of charging entrance fees, arguing that they could improve the quality and
standard of museums and even increase the number of audiences. On the other hand,
some researchers, museum directors and politicians (cf. Anderson, 1998; Johnson &
Thomas, 1998) propose another line of thought, whereby charges would more likely be
a barrier, particularly for those in lower socio-economic classes (Schrijvershop, 2007).
The debate about museum entrance fees has been underway since the first national
museum – the British Museum – was established in the U.K. (Anderson, 1998). It
encompasses various political, cultural, recreational and educational subjects (Bailey et
al., 1997). Since the British Museum was established in 1753 as a result of Hans
Sloane’s donation, no one has been charged for an entrance fee to that museum (Frey &
Meier, 2006). The rationale of a no-fee policy is that imposing fees would serve as an
obstacle to the public attendance and oppose the ideology and mission of a museum in
terms of its educational grounds (Dickenson, 2005). Furthermore, in addition to the
British Museum, most of the later-established museums in 1980s were sufficiently
supported by donor groups and governmental institutions. Consequently, such a
situation offered little incentive to generate earned income (Frey & Meier, 2006).
However, under the pressure of decreasing public funds and cost extensions since
the late 1980s and into the early 1990s, many national museums and galleries have been
encouraged to raise revenue through admission fees, special exhibitions, event fees,
renting rooms or shop sales (Dickenson, 2005; Martin, 2007). Accordingly, they have
4
adopted various pricing practices to generate revenue and promote efficient marketing
(Kotler et al., 2008). By considering various circumstances and influencing factors,
most museums in many countries have introduced a certain level of entrance fees as one
of their internal funding sources (Cowell, 2007; Trupiano, 2005). Most museums have
maintained their policies with the exception of a few countries, including the U.K.,
Ireland, Germany, France, Hungary and Denmark, where the free admission to public
museums policy has been set over the past few years (Lampi & Orth, 2009).
2.2 Variables affecting the willingness-to-pay
Estimating individuals’ willingness-to-pay for a commodity has generated considerable
attention from many studies, based on demand and utility functions (cf. Noonan, 2002;
2003; Venkatachalam, 2004). In spite of sometimes-conflicting findings, socio-
economic characteristics, such as age, gender, household size, education and income,
are the most common variables used to estimate the WTP. For instance, Santagata and
Signorello (2000) found a significant negative relationship between the age of
respondents and the WTP contributing to the continued existence of a museum, while
the size of the household and level of education were positively associated with the
WTP. Lampi and Orth (2009) also estimated visitors’ WTP for a museum before and
after implementing entrance fees, and analyzed the effects of their socio-economic
characteristics upon the WTP. They found that the introduction of entrance fees resulted
in a change in the structure of visitors towards more female and younger visitors.
Education plays an important role in appreciating heritage assets, being one of the
most efficient predictors of participation in cultural activities (Garrod & Fyall, 2000). In
other words, the higher the education level, the higher the likelihood of engaging in
cultural activities, including visiting museums (Kawashima, 1998; Richards, 2005;
Schrijvershop, 2007). Thus, it is not surprising that visitors’ WTP for cultural activities
is significantly influenced by their educational attainment.
In developing countries, charging higher prices for foreigners compared to other
segments of the population has been perceived by museum managers as fair,
fundamentally owing to higher income, on average, of foreign visitors. However, in this
article, in a novel line of thought, three variables – attitude, distance and involvement –
are also deemed an important justification for adopting a dual pricing strategy. In the
following, an attempt has been made to analyse how these variables make a distinction
in the behaviour of individuals in terms of their willingness-to-pay for a commodity or
service to be valued.
The first variable to consider is the so-called set of attitude characteristics1. The
findings of previous studies demonstrated that psychological constructs, such as
attitudes toward the goods or services in question extend the CVM models’ goodness of
fit (Bernath & Roschewitz, 2008); and – moving one step forward – some have also
indicated that the psychological variables are better predictors of WTP than socio-
economic variables (cf. López-Mosquera & Sánchez, 2011). Such findings have induced
more empirical research to gain a better understanding of how diverse psychological
variables influence consumers’ WTP, so as to provide guidelines on policy-making and
1 Eagly and Chaiken (1993, p. 1) defined attitude as a “psychological tendency that is expressed by
evaluating a particular entity with some degree of favour or disfavour”.
5
marketing activities, such as delivering appropriate goods and services with optimal
prices based on priorities held by consumers2.
A positive attitude towards the goods to be valued is most likely to result in higher
WTP for the users. For instance, Chung et al. (2011) argued that individuals who
exhibit a positive attitude towards the purposes of fees in the national forest (e.g.
improving facilities, increasing environmental protection, and developing education
programs) are more likely to have a relatively higher WTP. In a study of economic
valuation of the Gullfoss Waterfall in Iceland, Reynisdottir et al. (2008) also
demonstrated that visitors’ attitudes towards environmental protection positively
affected their WTP. The theoretical implications given by the environmental
psychology literature are applicable in the cultural heritage context, where so far little
attention has been paid to this subject (Tufts & Milne, 1999).
Another aspect, related to this variable, is that cultural attitude may play a critical
role in deciding whether to visit cultural and heritage sites. This is particularly the case
for inbound tourists to Iran, positioned primarily as a cultural destination, thus one of
the main expected motivations for travelling is to visit cultural attractions. This tends to
suggest that the foreign visitors’ WTP may be substantially influenced by their cultural
motivations and attitudes, along with income levels. Given that there are differences in
income levels, cultural attitudes and motivation between foreign and domestic visitors,
it is suggested that a difference exists in WTP between the two segments of visitors to
the National Museum of Iran. The assessment of this gap is expected to provide
implications for the feasibility of dual pricing.
Distance is another variable used to examine its potential for justification of dual
pricing. Given that a museum admission fee constitutes only a small fraction of the total
travel costs, it appears reasonable that inbound tourists, travelling a long distance to
arrive at their destination, are less price-sensitive and are prepared to pay higher prices
for a cultural attraction, than local visitors (Frateschi, Lazzaro, & Martos, 2009;
Schrijvershop, 2007). Additionally, the greater the distance the higher (usually) the
travel cost (Bedate et al., 2004; Brons, Pels, Nijkamp, & Rietveld, 2002). Thus, it is
reasonable to assume that the distance travelled from the point of origin to the
destination is negatively related to visitors’ sensitivity to admission fees. The effect of
geographic distance has also been identified in some CVM-based studies that focused
on environmental goods, i.e. farther distance led to higher WTP for site entrance fees
(Hornsten & Fredman, 2000; Loomis and Santiago, 2011; Reynisdottir, Song, &
Agrusa, 2008). Consistent findings in the environmental psychology literature are likely
to extend to other contexts, including cultural heritage sites, where so far little is known
about this relationship.
One should also keep in mind in analyzing the WTP the involvement of a consumer
in the product or service under consideration3. There are some diverse findings in the
literature regarding the dimensions of involvement. Laurent and Kapferer (1985), for
example, revealed components of involvement, such as importance, pleasure, perceived
probability and consequence of risk, and sign value. McIntyre and Pigram (1992)
conceptualized three dimensions of involvement: attraction (perceived importance of an
2 With respect to entry fees, a large body of CVM research on visitors’ attitudes has been conducted,
particularly focusing on environmental goods (cf. Bernath and Roschewitz, 2008; Chung et al., 2011; Lee
and Han, 2002; Meyerhoff, 2006). 3 Involvement refers here to a psychological state of motivation, arousal and interest in an activity under
consideration (cf. Havitz and Dimanche, 1997; Kyle et al., 2004).
6
activity and pleasure from the activity), self-expression (identity affirmation, derived by
participation in an activity), and centrality (the position the activity occupies in an
individual’s overall lifestyle). The former is relatively close to consumer involvement in
a product context, while the latter is rather applicable to the leisure activity context. It
has also been found that patterns of involvement vary by activities, products and
individual characteristics (Havitz & Dimanche, 1997; Kyle Graefe, Manning, &Bacon,
2004). Anyhow, what has been consistently demonstrated over the years is that the level
of involvement in an activity is determined by the degree of individual’s interest in the
activity and to what extent he or she is willing to engage in the activity.
Although visiting a museum and gallery is regarded as one of the recreational
activities, there seems to be few studies that examined the psychological or behavioural
involvement in cultural activities. Kirchberg (1998) suggested that individuals who
often visit museums are less likely to regard admission fees as an obstacle to attendance,
compared to those who make fewer visits. In a valuation study by Tuan and Navrud
(2008), foreign visitors were more willing to pay fees for preservation if the main
motivation was to visit historical cities and they experienced the site before the visit.
Salazar and Marques (2005) also found a positive relationship between the extent of
respondents’ interest in consuming cultural goods and their WTP.
Similarly to the attitude characteristics, it is expected that culturally focused
motivation of inbound tourists to Iran or at least those foreign visitors that have
travelled from afar to visit the National Museum of Iran, establish a “professional
segment” of visitors, who are more involved in the museum experience and
subsequently posses a higher WTP than domestic visitors.
3 The case of the National Museum of Iran
The National Museum of Iran, in the capital city of Tehran, was open to the public in
1944. In 1996, the museum extended to two separate buildings on the same site for the
pre-and post-Islamic periods, displaying an approximate 300,000 museum artefacts in
an area more than 20,000 square meters, with some 60 full-time employees. The
National Museum of Iran is the country’s largest museum of history and archaeology
that exhibits a variety of exquisite artefacts as long ago as the 800,000 BC through two
centuries ago mostly discovered in archaeological excavations from different areas of
Iran. The architectural style of the pre-Islamic building (two floors) and the post-Islamic
building (four floors) are fundamentally inspired by the ancient Persian Sassanid
dynasty (distinctive red bricks and a magnificent entry portal; see Figure 1) and a
combination of Islamic historical and modern elements, respectively (Mozaffary, 2007).
According to visitor statistics, nearly 200,000 visits were made to the museum from 1
December 2010 to 30 November 2011, of which about 21,500 were foreign tourists4.
4 More information about the National Museum of Iran, together with a presentation of its collections, can
be obtained from the official website: www.nationalmuseumofiran.ir.
7
Figure 1: Main entrance to the National Museum of Iran (Sassanid architecture)
Source: Authors’ photograph.
The current entry charge to the pre-Islamic section of the National Museum of Iran
is RLS 10,000 (equivalent to USD 0.71) per adult. At the time, this pricing structure had
been established five years earlier5, with no price discrimination between residents and
foreign visitors. This has promoted a wide discussion by relevant domestic experts and
managers that the current entrance fee is too low to capture the economic value that
foreign visitors place on their visits and to contribute appropriate economic input into
the museum (cf. Tehrani, 2011). The relatively low level of the entrance fee to the
National Museum of Iran can also be criticized as not appropriately reflecting the
demand of the inbound tourists market. In other words, the National Museum of Iran
would be a “must-see” attraction for international tourists, as it has unbeatable
characteristics that no competitors in Iran can provide. Thus, it might be reasonable to
suppose that the foreign visitors of the National Museum of Iran are willing to pay more
than what has been charged (i.e. USD 0.71), due to the unique cultural heritage values
that the museum possesses.
5 Note that, as the post-Islamic section of the museum has been closed for the past four years, the current
study was conducted only at the pre-Islamic section.
8
4 Methodology and the data
4.1 The contingent valuation method
The study employed the contingent valuation method (CVM), a widely applied
technique of economic valuation of non-priced public goods and services, where there is
neither accessible nor reliable information on prices (Aadland & Caplan, 2006; Chung,
2008; Throsby, 2003). A hypothetical scenario is given to individuals who are directly
asked their maximum WTP for the benefits received (Lee and Han, 2002; Sanz et al.,
2003; Veisten, 2007). The scenario informs the respondents of what would be charged
or what would be changed in a setting in terms of quality or quantity (Reynisdottir et
al., 2008). In fact, the WTP values are contingent upon the special hypothetical market
presented to respondents, thus the title (Mitchell & Carson, 1989). Historically, since
Davis (1963) first applied the CVM in general, it was first applied in the field of arts in
the early 1980s (Throsby, 2003) and in the field of cultural heritage in the 1990s
(Salazar & Marques, 2005), respectively.
In CVM-based direct stated preferences there are several ways to elicit WTP
information, including dichotomous choice (Verbič and Slabe-Erker, 2009), payment
cards and auction bidding (Choi, Ritche, Papandrea, & Bennett, 2010), referendum,
iterative bidding game and open-ended formats (Dutta, Banerjee, & Husain, 2007). In
this study, an open-ended format is used, whereby a respondent is asked to state his or
her maximum willingness-to-pay for a product or service in monetary terms, without
any suggested prices. An advantage of this kind of a format in comparison to closed-
ended questioning is that the former has no anchoring effects in that the respondents’
WTP is not influenced by a given price, and has therefore been frequently used in the
literature (cf. Hornsten & Fredman, 2000; Kyle, Graefe, & Absher, 2002; Lampi &
Orth, 2009; Sattout, Talhouk & Caligari, 2007; Solino, Prada & Vazquez, 2010).
However, there exists a sound criticism against open-ended questioning regarding
its high number of zero, “protest” zero, missing and extreme values, as there is no
implicit clue for respondents to think of their WTP (Lampi & Orth, 2009; Whitehead,
2006). In this study such problems have been tried to be avoided by using face-to-face
interviews and a question asking the reason of zero WTP, aimed at distinguishing valid
(i.e. zero WTP in accordance with economic behaviour, such as restrictions on income)
and protest zero responses (i.e. zero WTP indicating dissatisfaction with some aspects
of the presented hypothetical market or, in this case, the quality of a museum, cf. Bedate
et al., 2011). Additionally, the survey was conducted after the respondents’ experience
of the National Museum of Iran, so as to lead to real valuation.
As to the hypothetical nature of the CVM, it is argued that hypothetically measured
WTP may be higher than the real WTP (cf. Borda, 2007; Lusk and Hudson, 2004;
Venkatachalam, 2004). In order to reduce this “hypothetical bias” (i.e. the discrepancy
between the hypothetical WTP and the real payment), we used the so-called “cheap talk
script” prior to the WTP question. This was originally suggested by Cummings and
Taylor (1999), where respondents are explicitly reminded of potential biases in a
hypothetical scenario (Aadland & Caplan, 2006; Lampi & Orth, 2009). Previous
empirical studies show that the cheap talk script is useful in removing the hypothetical
bias (Casey, Brown, & Schumann, 2010).
In this article, based on the literature outlined in Chapter 2, the CVM is analyzed
using the following function to explain the maximum WTP (dependent variable wtp,
9
obtained by an open-ended format) of respondents for an entrance fee to the National
Museum of Iran:
{ }, , ,wtp f= D G A I , (1)
where D is a vector of socio-economic characteristics, G measures geographical
characteristics, A measures attitude characteristics, and I is a vector of involvement
characteristics. Among the socio-economic characteristics, we have age, a, gender, g,
educational attainment of respondents, e, and their monthly income, y, i.e.
( , , , )a g e y=D . The geographical characteristics are represented by the distance from
respondent’s place of residence to the site, d, i.e. ( )d=G . The attitude characteristics
are represented by respondent’s general opinion about museums, o, i.e. ( )o=A . At last,
among the involvement characteristics, we have the respondent’s knowledge about
museums, k, the average number of visits to museums per year, v, and the respondent’s
knowledge of the National Museum of Iran before the visit, m, i.e. ( , , )k v m=I .
4.2 Questionnaire and the data
The interview questionnaire consisted of four sections6. Section 1 was designed to
measure the respondents’ level of involvement and their attitudes toward museums,
respectively. First, the respondents were inquired about the average number of visits to
museums per year, the knowledge about museums in general, and previous knowledge
of the National Museum of Iran. The latter two were subjectively evaluated based on a
five-point scale (ranging from 1 = “none at all” to 5 = “very high”). Subsequently, in
order to gauge respondents’ attitude towards museums, the following six statements
were presented and subjectively evaluated based on a five-point Likert scale (ranging
from 1 = “strongly disagree” to 5 = “strongly agree”):
1. “Museums play an important role in preserving communities’ heritage.”
2. “Museums facilitate communities’ perception of their history, culture and identity.”
3. “I attempt not to harm museums’ collections during my visit.”
4. “Visiting a museum is one of my main activities during the travel.”
5. “I support stringent regulations against smuggling museums’ collections.”
6. “Visiting a museum is an ideal recreational activity at leisure.”
In addition, motivation of a respondent for visiting Iran (Tehran), as well as the
National Museum of Iran was inquired using nominal items.
Section 2 measured the maximum WTP for entrance fee to the National Museum of
Iran. As mentioned earlier, we employed a “cheap talk script” prior to the open-ended
WTP question to reduce the possibility of a hypothetical bias. The hypothetical scenario
and the WTP question were then presented as follows:
6 The questionnaire was designed separately for foreign visitors in English language and for national
visitors in Persian language.
10
“The scarcity of financial resources is a major challenge for the National Museum of
Iran, and cultural tourists and visitors seem viable means to generate revenues through
entry fees. The National Museum of Iran relies on this self-generated revenue for
fulfilling its main functions in society, including collecting, preserving and exhibiting
artefacts, as well as developing educational programs. Thinking about the experience
you have had visiting the National Museum of Iran, what is the maximum willingness-
to-pay in terms of an entrance fee, before you would decide not to visit this museum?”
If a respondent claimed that the entry fee should be zero, he or she was requested to
give a specific reason for this.
Section 3 had a single question, inquiring the city of residence of the respondent.
This question was aimed to gather information to calculate the distance between
respondent’s place of residence and the National Museum of Iran.
Section 4 included inquiries about the respondent’s socio-economic characteristics,
including age, gender (0 = “male”, 1 = “female”), education, and (net) monthly
household income. Information on education level was collected based on a five-point
scale (1 = “high school diploma or below”, 2 = “associate degree”, 3 = “bachelor’s
degree”, 4 = “master’s degree”, and 5 = “doctorate degree”). This was then converted to
years of schooling, taking into account (at least to some extent) different education
systems. Information on monthly household income was collected in Iranian rials (IRR)
for residents and US dollars (USD) for foreigners. Monthly household income of
residents was then converted to USD using the appropriate exchange rate.
In order to ensure the validity of measurement, the initial version of the
questionnaire was preliminarily examined by researchers with expertise in contingent
valuation and museum industry. A pre-test was then conducted in December 2010 using
two equal groups in size of domestic and foreign visitors to the National Museum of
Iran, totalling 60 visitors, to assess its logical consistency, ease of understanding and
applicability of the questions. The pre-test suggested that a few questions needed to be
changed in its wording.
The main survey was conducted by face-to-face interviews, which lasted for eight
days in Spring 2011, when no temporary exhibition existed (and thus no associated bias
arose) during that period at the museum. The sample included interviewees over 18
years of age, who were approached by random sampling at the main entrance of the
National Museum of Iran after their museum visit. Contrary to the willingness of almost
all domestic visitors for participation, approximately one third of foreign visitors
refused the survey due to scarce time of their travelling tours or language barriers. Of a
total of 613 interview questionnaires (392 from domestic visitors and 221 from foreign
visitors) 35 responses were excluded because of incomplete information. Consequently,
578 questionnaires (371 from domestic visitors and 207 from foreign visitors) were
considered for the analysis.
Finally, zero values of WTP from the sample were analyzed. It turned out that
domestic and foreign respondents gave 12.9% and 4.8% zero responses to the maximum
WTP question, respectively. The reasons for not being willing to pay the fee included
lack of attractiveness of exhibitions, inability to pay, lack of quality of museum
services, resistance to paying an entrance fee to the National Museum of Iran, and other
11
reasons.7 This was then used to distinguish true (valid) zero response from protest zero
responses. In the following analysis, “resistance to paying an entrance fee” responses
(17 and 1 responses from domestic and foreign visitors, respectively) were regarded as
protest zero responses and thus eliminated, as it is argued that such responses may
produce bias in CVM estimates (cf. Solino et al., 2010; Verbič and Slabe-Erker, 2009).
Consequently, 560 questionnaires (354 from domestic visitors and 206 from foreign
visitors) were used in the analysis.
5 Empirical results and the analysis
5.1 Sample characteristics
Descriptive statistics of the sample, which was gathered as described in the previous
section, are given in Table 1 for the most important variables. Of the 560 respondents,
63.2% were domestic visitors and 36.8% were foreign visitors8. The mean age of
domestic and foreign visitors at the National Museum of Iran was 34.6 and 48.4 years,
respectively (39.7 years for the whole sample). Some 55.7% of domestic visitors were
female, while only 40.2% of foreign visitors were female (exactly 50% for the whole
sample). Foreign visitors were more educated than domestic visitors, which can be seen
from both the education level and years of schooling. In terms of the education level,
there were 32.2% of domestic visitors and only 12.6% of foreign visitors with high
school diploma or below on one end, and 6.2% of domestic visitors and as much as
9.2% of foreign visitors with a doctorate degree on the other end. In terms of years of
schooling, foreign visitors had on average one year more of educational attainment than
domestic visitors (14.5 years for the whole sample).
Foreign visitors reported substantially higher (net) monthly household income
(3,243 USD on average) than domestic visitors (404 USD on average), with a mean of
1,448 USD for the whole sample. This is understandable due to differences in the
standard of living. The distance from respondent’s place of residence was also, as
expected, substantially higher for foreign visitors (4,429 kilometres on average)
compared to domestic visitors (266 kilometres on average), with a mean of 1,780
kilometres for the whole sample.
In terms of respondents’ attitudes towards museums, measured through subjective
evaluation of the six statements, presented in the previous chapter, foreign visitors gave
a substantially higher percentage of favourable responses (“strongly agree”) and a
substantially lower percentage of unfavourable responses (“disagree” and “strongly
disagree”) than domestic visitors (see Table 2). Based on this, a new variable was
created, measuring the number of favourable attitudes towards museums. This attitude
variable was defined as the number of statements (values from 0 to 6), to which a
respondent answered with “agree” or “strongly agree”, and was significantly higher for
7 For domestic visitors, the most frequently cited reason for claiming zero entrance fees was “it is wrong
to impose an entrance fee to the National Museum of Iran” (4.6%), while for foreign visitors, “the service
quality of the museum is not good enough” (2.4%). 8 The foreign respondents arrived from 27 countries; mostly from Germany (10.6%), France (8.7%), Italy
(7.7%), Japan (6.8%), Spain (6.8%), and China (6.3%).
12
foreign visitors (5.39) compared to domestic visitors (4.57), with a mean of 4.88
favourable attitudes towards museums for the whole sample.9
Table 1: Descriptive statistics of key variables
a) Domestic visitors (n = 354)
Variable Arithmetic
mean
Standard
deviation Lowest value Highest value
Respondent's age 34.60 10.34 20 64
Respondent's gender 0.5565 0.4975 0 1
Years of schooling 14.14 3.99 8 20
Monthly household income (in USD) 403.62 165.78 107 857
Distance from respondent’s
place of residence (in 1,000 kilometres) 0.266 0.378 0.05 1.8
Average number of visits to
museums per year 2.457 3.293 0 14
Knowledge about museums in general 1.257 0.638 1 5
Previous knowledge of the National
Museum of Iran 1.353 0.700 1 4
Attitude 4.573 1.730 0 6
Involvement 0.246 0.481 0 3
Maximum willingness-to-pay (in USD) 0.70 0.65 0 4.28
b) Foreign visitors (n = 206)
Variable Arithmetic
mean
Standard
deviation Lowest value Highest value
Respondent's age 48.38 10.60 23 74
Respondent's gender 0.4029 0.4917 0 1
Years of schooling 15.21 3.54 8 20
Monthly household income (in USD) 3,242.72 1,645.34 700 7,500
Distance from respondent’s
place of residence (in 1,000 kilometres) 4.429 2.119 0.5 9.6
Average number of visits to
museums per year 5.097 4.137 0 14
Knowledge about museums in general 1.675 1.034 1 5
Previous knowledge of the National
Museum of Iran 2.199 0.980 1 5
Attitude 5.393 1.085 0 6
Involvement 0.704 0.688 0 3
Maximum willingness-to-pay (in USD) 6.34 4.38 0 30
Source: Authors’ calculations.
9 Reliability of the attitude components was ensured with Cronbach’s alpha of 0.885 for domestic visitors
and 0.833 for foreign visitors, respectively.
13
Additionally, foreign visitors have more frequently visited museums than domestic
visitors (5.10 visits per year compared to 2.46 visits per year), with an average of 3.48
visits per year for the whole sample (Table 1). A similar conclusion can be made with
respect to visitors’ knowledge about museums in general (mean of 1.68 for foreign
visitors compared to 1.26 for domestic visitors), and interestingly visitors’ previous
knowledge about the National Museum of Iran (mean of 2.20 for foreign visitors
compared to 1.35 for domestic visitors). These three variables, i.e. the average number
of visits to museums, knowledge about museums in general and previous knowledge
about the National Museum of Iran, were combined to form a new variable, measuring
the involvement of a visitor in the experience of the museum. The involvement variable
was defined for every visitor as the sum of three components (values from 0 to 3): being
a frequent visitor of museums, having a comprehensive knowledge of museums in
general, and having a comprehensive knowledge of the National Museum of Iran.10
Involvement was significantly higher for foreign visitors (0.70) compared to domestic
visitors (0.25), with a mean of 0.41 for the whole sample.
Table 2: Respondents’ attitudes towards museums
Statement
Response (%)
Strongly disagree Disagree Neutral Agree Strongly agree
DV FV DV FV DV FV DV FV DV FV
1 0.56 0.00 3.39 0.00 7.06 1.94 46.33 31.07 42.66 66.99
2 0.85 0.00 3.11 0.00 6.78 2.91 41.81 27.18 47.46 69.90
3 0.85 0.00 3.95 0.00 8.19 1.94 38.70 29.61 48.31 68.45
4 4.80 0.49 18.36 10.19 37.85 23.79 24.29 21.36 14.69 44.17
5 0.85 0.00 4.24 0.00 7.91 3.88 32.77 29.13 54.24 66.99
6 2.82 0.00 10.73 0.49 20.34 15.05 36.44 33.01 29.66 51.46
Note: DV – domestic visitors, FV – foreign visitors.
Source: Authors’ calculations.
The significant distinction between the two segments (subsamples) of visitors can
be explained by the fact that cultural tourists account for the largest market share of the
country’s inbound tourists, placing high importance on museums, historical sites and
cultural attractions in general. Indeed, foreign respondents’ primary motivation to visit
Iran (Tehran) was “visiting museums and historical sites” with 72.9% of responses11
. In
addition, the vast majority of foreigners (86.0%) stated that the main motivation for
visiting the National Museum of Iran is “cultural,” while only a small number of
domestic visitors (39.6%) agreed with that. Domestic visitors had other, equally
important motivations, including “social activities” (19.1%), “recreational purposes”
(16.7%), and “college research” (12.1%). Culturally focused motivation of destination
choice thus tends to classify inbound tourists to Iran as a “professional segment” of the
market that has on average a finer attitude towards museums and is more involved in the
museum experience than domestic visitors. Since the National Museum of Iran is a
10
Frequent visitor status was defined as 1 for average number of visits per year greater than four (taking
into account the sample mean), and 0 otherwise. The two comprehensive knowledge indicators were
defined as 1 if a respondent answered with “high” or “very high”, and 0 otherwise. 11
Other, less frequent reasons included “visiting friends or relatives” (9.8%), “visiting religious sites”
(5.3%), “visiting natural sites” (4.9%), and “conducting business” (4.3%).
14
“must-see” attraction for most inbound tourists to Iran12
, it could be expected that
profiles and characteristics of the foreign visitors to this museum are relatively similar
to that of foreign visitors visiting other attraction of the country.
After excluding protest zero responses from the sample, as described in the
previous chapter, the maximum willingness-to-pay for entrance fee to the National
Museum of Iran was evaluated. It turned out to be substantially higher for foreign
visitors (mean of 6.34 USD and median of 5.50 USD) than for domestic visitors (mean
of 0.70 USD and median of 0.64 USD), with a mean of 2.77 USD and median of 0.85
USD for the whole sample. The mean WTP of foreign visitors was thus 9.1-fold of the
mean WTP of domestic visitors, while the median WTP of foreign visitors was 8.6-fold
of the median WTP of domestic visitors. Even though we do not yet control for other
determinants of WTP in this section, it is worth noting that the differences in mean and
median WTP between the two subsamples were highly statistically significant. The
results also showed that for both groups the median WTP was lower than the mean
WTP, where 71.6% of domestic and 55.3% of foreign respondents reported,
respectively, their WTP below the mean WTP.
The mean and median WTP for the segment (subsample) of foreign visitors indicate
that the current entry fee to the National Museum of Iran (USD 0.71) is substantially
less than what they considered to be their maximum WTP, while on the contrary, the
mean and median WTP of domestic visitors are not significantly different from the
current entry fee. Furthermore, lower variance of the WTP estimates of domestic
respondents compared to foreign visitors could indicate that there was more consensus
among the residents on how much they were willing to pay for the fee.
5.2 Econometric analysis
Within the framework of contingent valuation, developed in this article, we propose the
following empirical model of the maximum willingness-to-pay of visitor i, wtpi, for
entrance fee to the National Museum of Iran:
2
1 2 3 4 5 6 7 8 9 10i i i i i i i i i i iwtp a a g e y att inv d nat uβ β β β β β β β β β= + + + + + + + + + + , (2)
where ai represents the age of respondent i in years, gi represents gender (0 = “male”, 1
= “female”), ei stands for years of schooling, yi is monthly household income in 1,000
USD, atti is the attitude variable, defined as explained in the previous section, invi is the
involvement variable, defined as explained in the previous section, di represents the
distance between respondent’s place of residence and the National Museum of Iran in
1,000 kilometres, and nati stands for the nationality of visitor i (0 = “domestic visitor”, 1
= “foreign visitor”). Added is the disturbance term 2(0, )u IID σ� , expressing the
stochastic nature of our empirical model. Expression (2) was estimated by the least
squares estimator, providing for all the assumptions necessary for the method to yield
minimum-variance linear unbiased estimates.
The estimation results are presented in Table 3, where the diversity between the two
segments (subsamples) of visitors is captured first by “nationality” (specifications 1–2)
12
Visiting this museum is one of main activities held by almost all Iranian tourism travel agencies
offering services to inbound tourists in Tehran.
15
and then by the “distance” (specifications 3–4). This was done, among other reasons, to
illustrate the robustness of results. As can be seen from Table 3, the WTP was positively
and statistically significantly related to years of schooling, household income, attitude
and involvement. Gender was not a statistically significant determinant of WTP in any
of the model specifications, while the relationship between age of a respondent and his
WTP demonstrated the so-called “U–shape”, where the effect of age changes sign at a
certain number of years. Based on the standardized regression coefficients (“beta
coefficients”, not shown), the most important determinants of the maximum WTP were
income, nationality and age, followed by attitude and involvement. Let us look at these
results in more detail.
Table 3: Estimated parameters of the model of maximum willingness-to-pay
Explanatory variable Model specification
(1) (2) (3) (4)
Constant term –0.7767 –2.9056*** –0.9222* –3.3318***
(0.5395) (1.0954) (0.5543) (1.1221)
Age –0.0266*** 0.0906* 0.0211* 0.1179**
(0.0096) (0.0534) (0.0110) (0.0546)
Age squared – –0.0014**
– –0.0016**
(0.0006) (0.0006)
Gender –0.1224 –0.0972 –0.1238 –0.0951
(0.2022) (0.2018) (0.2088) (0.2082)
Years of schooling 0.0892*** 0.0753** 0.0688** 0.0796***
(0.0303) (0.0309) (0.0310) (0.0287)
Household income 0.9899*** 1.0081*** 1.3115*** 1.3243***
(0.1039) (0.1039) (0.0892) (0.0889)
Attitude 0.1420* 0.1579** 0.1368* 0.1549**
(0.0748) (0.0749) (0.0773) (0.0773)
Involvement 0.6226*** 0.6190*** 0.7298*** 0.7232***
(0.1862) (0.1856) (0.1905) (0.1896)
Nationality 2.6793*** 2.6249***
– – (0.3729) (0.3723)
Distance – – 0.2615*** 0.2561***
(0.0599) (0.0597)
n 560 560 560 560
se 2.3521 2.3437 2.4182 2.4072
R2 0.6286 0.6319 0.6074 0.6117
Adjusted R2 0.6239 0.6266 0.6024 0.6060
F–test 133.45 118.24 122.00 108.49
p–value 0.0000 0.0000 0.0000 0.0000
Notes: Maximum willingness-to-pay (in USD) is the endogenous variable of the model in all four
specifications. Standard errors are given in parentheses. Asterisks *, ** and *** denote significance at the
10 percent, 5 percent and 1 percent level, respectively.
Source: Authors’ calculations.
16
Based on our sample of data, each additional 1,000 USD of household income
increased on average, ceteris paribus, the maximum WTP of a respondent by some 1.0–
1.3 USD. Each additional year of schooling increased on average, ceteris paribus, the
maximum WTP of a respondent further by some 6.9–8.9¢. Excluding age squared from
expression (2), the impact of age on the maximum WTP was ambiguous (a negative
coefficient in specification 1 and a positive coefficient in specification 3), but after
taking into account the U–shaped relationship between the two variables (specifications
2 and 4), we can observe that each additional year of age increased on average the
maximum WTP of a respondent by some 9.1–11.8¢, however at a higher age this effect
obtained a slightly negative inclination. Each additional favourable attitude towards
museums in general that a respondent had increased on average, ceteris paribus, his or
her maximum WTP by some 0.14–0.16 USD. Each additional component of
involvement (frequent visitor of museums, comprehensive knowledge of museums
and/or comprehensive knowledge of the National Museum of Iran) that was
characteristic of a respondent further increased on average, ceteris paribus, his or her
maximum WTP by some 0.62–0.73 USD.
The two variables that were intended to test the level of dissimilarity between the
two segments (subsamples) of visitors, i.e. distance and nationality, were also highly
statistically significant. As we can observe from Table 3, every additional 1,000
kilometres of distance between respondent’s place of residence and the National
Museum of Iran resulted on average, ceteris paribus, in an increase in his or her
maximum WTP by 0.26 USD (specifications 3–4). Moreover, foreign visitors reported
on average, ceteris paribus, maximum WTP that was by some 2.62–2.67 USD higher
than domestic visitors (specifications 1–2). The maximum willingness-to-pay for
entrance fee to the National Museum of Iran is thus statistically significantly higher for
foreign visitors compared to domestic visitors; not only unconditionally (as shown in
the previous section), but also after controlling for socio-economic, attitude and
involvement characteristics of WTP. We find the explanatory power of the model
satisfactory for this type of analysis (determination coefficient amounted to some 0.61–
0.63).
Additionally, we estimated the logarithmic transformation of expression (2), as the
regression coefficients then represent approximations of elasticities:
1 2 3 4 5 6 7 8ln ln ln ln ln lni i i i i i i i i
wtp a g e y att inv nat uβ β β β β β β β= + + + + + + + + . (3)
Expression (3) was also estimated by the least squares estimator, and the subsequent
results for both segments (subsamples) of visitors as well as for the pooled model are
presented in Table 4. As we can observe from Table 4, gender was again not a
statistically significant determinant of WTP. The impact of age by itself on the
maximum WTP was “dichotomous” – a negative elasticity for domestic visitors13 and a
positive elasticity for foreign visitors, explaining (to a certain extent) the ambiguity of
the effect from Table 3, even though this time we were not able to test for the “U-
shaped” effects14
. Let us look at the remaining results in more detail.
13
The negative elasticity of maximum WTP with respect to age may be attributed to the fact that the
unemployment rate of younger people in Iran (and in the wider region) is much higher than for older
people and, on average, their willingness-to-pay on the hypothetical market is expected to be lower. 14
Age squared was eliminated as explanatory variable from the model as it would cause perfect
multicollinearity in the log-transformed model with age included.
17
Based on our sample of data, increasing the years of schooling by 1 percent would
increase on average, ceteris paribus, the maximum WTP of domestic and foreign
visitors by 0.15 and 0.55 percent, respectively. This elasticity is thus much higher for
foreign visitors than for domestic visitors and for the whole sample (0.28 percent).
Increasing the household income by 1 percent would increase on average, ceteris
paribus, the maximum WTP of domestic and foreign visitors by 0.31 and 0.26 percent,
respectively. Income elasticity is thus comparable for foreign visitors with the one for
domestic visitors and for the whole sample (0.31 percent). Increasing the favourable
attitude towards museums in general by 1 percent would increase on average, ceteris
paribus, the maximum WTP of domestic and foreign visitors by 0.13 and 0.38 percent,
respectively. This elasticity is thus much higher for foreign visitors than for domestic
visitors and for the whole sample (0.14 percent). Increasing the involvement in the
experience of visiting the museum by 1 percent would increase on average, ceteris
paribus, the maximum WTP of foreign visitors by 0.36 percent, while this elasticity was
not statistically significant for domestic visitors.
Table 4: Estimated elasticities of the model of maximum willingness-to-pay
Explanatory variable Model specification
Domestic visitors Foreign visitors Pooled model
Constant term –0.1534 0.4069 –0.0005
(0.1983) (0.7159) (0.2611)
Logarithms of age 0.1036** –0.3129** –0.0522
(0.0461) (0.1500) (0.0593)
Gender –0.0359 0.0761 –0.0193
(0.0266) (0.0702) (0.0321)
Logarithms of years of schooling 0.1536*** 0.5498*** 0.2790***
(0.0485) (0.1459) (0.0610)
Logarithms of household income 0.3064*** 0.2633*** 0.3063***
(0.0306) (0.0645) (0.0337)
Logarithms of attitude 0.1257*** 0.3753*** 0.1357***
(0.0273) (0.1301) (0.0380)
Logarithms of involvement –0.0618 0.3591*** 0.1851***
(0.0437) (0.0896) (0.0474)
Nationality – – 0.6412***
(0.0751)
N 354 206 560
se 0.2459 0.4839 0.3741
R2 0.4153 0.4058 0.7811
Adjusted R2 0.4052 0.3878 0.7783
F–test 41.07 22.65 281.42
p–value 0.0000 0.0000 0.0000
Notes: Logarithms of maximum willingness-to-pay is the endogenous variable of the model in all three
specifications. Standard errors are given in parentheses. Asterisks *, ** and *** denote significance at the
10 percent, 5 percent and 1 percent level, respectively.
Source: Authors’ calculations.
Again, the relationship between the maximum WTP and its socio-economic,
attitude and involvement characteristics, measured by the regression coefficient of the
dummy variable on nationality, was highly statistically significantly different for
foreign visitors, as compared to domestic visitors. This is also evident from the increase
18
in explanatory power of the model, when transitioning from one of the subsamples to
the whole sample (pooled model).
Finally, we were interested in visitors’ psychological characteristics, i.e. attitudes
and involvement, in more detail. In particular, we wanted to establish whether these two
variables are to a certain extent dependant on the socio-economic, geographical and
other determinants from our initial model of the maximum WTP. For this reason, we
estimated the following two regressions by the least squares estimator:
2
1 2 3 4 5 6 7 8i i i i i i i i iatt a a g e y v d uβ β β β β β β β= + + + + + + + + , (4)
2
1 2 3 4 5 6 7 8i i i i i i i i iinv a a g e y a4 d uβ β β β β β β β= + + + + + + + + , (5)
where, besides the variables that were already indicated in expression (2), vi represents
the average number of visits to museums of respondent i per year, and a4i denoted
respondents, for whom visiting a museum was a major activities during the travel15
.
The estimation results of expressions (4) and (5) are presented in Table 5. As we
can see from Table 5, the explanatory power of the three model specifications is
relatively low (the value of determination coefficient varies from 0.25 to 0.30), but the
regression coefficients have interesting values and are statistically significant, thus the
models deserve some attention. Based on the standardized regression coefficients (not
shown), the most important determinants of attitude in expression (4) were age and
education, while the most important determinants of involvement in expression (5) were
distance and income, followed by education. Gender was again not a statistically
significant determinant in any of the model specifications.
If we look at these results in more detail, we can observe from Table 5 that based
on our sample age exhibited a “U-shaped” impact on visitors’ attitude towards museums
in general (specification 2). Namely, each additional year of age decreased on average
the number of favourable attitudes towards museums by 0.07; however at a higher age
this effect obtained a slightly positive inclination. Each additional year of schooling
increased on average, ceteris paribus, the number of favourable attitudes towards
museums by 0.16–0.17 (specifications 1–2). Each additional 1,000 USD of household
income increased on average, ceteris paribus, the number of favourable attitudes
towards museums further by 0.70–0.78. An increase in the average number of visits to
museums per year by one increased on average, ceteris paribus, the number of
favourable attitudes towards museums by 0.07. Every additional 1,000 kilometres of
distance between respondent’s place of residence and the National Museum of Iran
resulted on average, ceteris paribus, in an increase in the number of favourable attitudes
towards museums by 0.08. Older, more educated, wealthier and more involved visitors
thus had more favourable attitudes towards museums.
On the other hand, based on our sample age did not exhibit a statistically significant
effect on involvement (specification 3), neither linearly nor “U-shaped”. Each additional
year of schooling increased on average, ceteris paribus, the (composite) involvement in
the experience of visiting the museum by 0.02. Each additional 1,000 USD of
household income increased on average, ceteris paribus, the involvement further by
0.07. Respondents, for whom visiting a museum was a major activities during the travel,
15
This variable was constructed as an indicator variable that took the value 1 if a respondent answered to
Statement 4 (see Chapter 4) with “agree” or “strongly agree”, and 0 otherwise.
19
exhibited involvement in the experience of visiting the museum that was on average,
ceteris paribus, higher by 0.32 compared to the rest of the visitors. Every additional
1,000 kilometres of distance between respondent’s place of residence and the National
Museum of Iran resulted on average, ceteris paribus, in an increase in involvement by
0.02. More educated, wealthier and more museum-oriented visitors were thus more
involved in the experience of visiting the museum.
Table 5: Estimated parameters of the models of attitude and involvement
Explanatory variable Attitude Involvement
(1) (2) (3)
Constant term 1.8287*** 3.0741*** –0.1597
(0.2925) (0.6022) (0.1177)
Age 0.0025 –0.0670** –0.0002
(0.0053) (0.0299) (0.0021)
Age squared – 0.0008**
– (0.0004)
Gender 0.2251 0.2167 –0.0166
(0.1142) (0.1462) (0.0456)
Years of schooling 0.1621*** 0.1684*** 0.0200***
(0.0155) (0.0156) (0.0064)
Household income 0.7817** 0.70176** 0.0707***
(0.2871) (0.2883) (0.0194)
Number of visits to
museums
0.0685*** 0.0694*** –
(0.0160) (0.0160)
Visiting museums as a
major activity – –
0.3172***
(0.0508)
Distance 0.0771** 0.0789** 0.0249*
(0.0328) (0.0327) (0.0130)
N 560 560 560
se 1.3271 1.3217 0.5289
R2 0.2969 0.3039 0.2485
Adjusted R2 0.2893 0.2951 0.2404
F–test 38.92 34.43 30.48
p–value 0.0000 0.0000 0.0000
Notes: Standard errors are given in parentheses. Asterisks *, ** and *** denote significance at the 10
percent, 5 percent and 1 percent level, respectively.
Source: Authors’ calculations.
20
6 Concluding remarks
Since the early 1990s, the notion of museum entrance fees has drawn attention to many
studies, even though scarce attention has been paid in the literature so far to pricing
policies, adopted by museums in developing countries. One of the controversial,
frequently applied, but rarely researched is dual pricing for entrance fees in order to
increase revenue. The purposes of the present article were to estimate the admission fees
that foreign and domestic visitors are willing to pay, respectively, for the National
Museum of Iran, and also to examine the relationship between the visitors’ willingness-
to-pay for museum admission fees and their various socio-economic, geographical, and
psychological characteristics. The findings obtained have several policy implications for
this museum in particular and for other museums and tourism heritage attractions
generally in developing countries.
To begin with, along with the fundamental hypothesis of our article, the average
maximum willingness-to-pay for entrance fees turned out to be substantially higher for
foreign visitors and substantially higher than the current entrance fee, while on the
contrary, the average WTP of domestic visitors is not significantly different from the
existing entrance fee; not only unconditionally, but also after controlling for socio-
economic, attitude and involvement characteristics. This prompts considering the
implementation of a dual pricing strategy, whereby a reasonable increase in the existing
admission fees strategy be applied for foreign (and possibly domestic) visitors in order
to increase the economic impact of visitors for the museum.
Based on econometric estimation of the maximum willingness-to-pay, the most
important determinants of WTP for domestic visitors were income, attitude, and
education, while for foreign visitors these were income, education, involvement and
attitude. For both groups of visitors, the maximum WTP was positively and statistically
significantly related to the above variables. Thus, as the second major policy
implication, we could underline the significance of education, involvement, attitude and
distance travelled for justification of adopting dual pricing for admission fee to the
National Museums of Iran, in addition to higher income levels of foreign visitors – thus
far the only legitimate motive for introducing dual pricing among most museum
mangers in Iran and other developing countries.
This justification is corroborated when we take into account that foreign visitors on
average had higher education level, higher income, more favourable attitudes towards
museums and were more involved in museums experience, as well as their substantially
higher elasticities of WTP with respect to years of schooling, attitudes and involvement,
compared to domestic visitors. These findings give credibility to the belief that foreign
visitors are much more likely to be willing to pay a reasonably increased entrance fee
than domestic visitors, other things being equal.
However, what also needs to be considered is visitors’ compliance and agreement
with price differences, which is essential for a successful discriminatory pricing policy
(Mudie and Pirrie, 2006). Setting different prices for different segments of visitors
might evoke price unfairness and negative emotional responses, and could even make
some visitors resistant to the policy (Howard, 2009).16
This is somewhat in line with the
findings of this article. Even though a significant difference in the WTP between the
two segments of visitors was found, the optimal level of disparity needs to be set, to
16
In practise, dual pricing in developing countries has been one of the challenges that causes much
resentment and often deters return visits (e.g. in case of the cultural attractions in Thailand).
21
avoid violating the notions of equity and dissatisfying the inbound visitors.
Furthermore, perceived equity resulting from this disparity needs to be further studied in
future research.
The inclusion of two main behavioural and psychological variables in the article,
i.e. attitude and involvement, allowed us to have a more in-depth analysis of visitors’
behaviour. In particular, we studied whether visitors’ attitudes and involvement were
dependant on their socio-economic and geographical characteristics. The results suggest
that older, more educated, wealthier and more involved visitors had more favourable
attitudes towards museums, while more educated, wealthier and more museum-oriented
visitors were more involved in the experience of the museum. This is consistent with the
general evidence that museum visitors on average belong to higher socio-economic
classes (Maddison & Foster, 2003). It could be interpreted in the sense that imposing a
same entrance fee for foreign and domestic visitors is more favourable for higher-
income visitors and to a lesser extent an effective policy for attracting poorer people.
The third main policy implication drawn from the finding is that foreign visitors’
most frequently cited reason for zero WTP was the poor quality of services provided by
the museum. Chung et al. (2011) found that visitors’ WTP would become higher if they
are more likely to believe that the fees will be used to increase the quality of facilities
and services, and to enrich visitor programs. This brings support to the view that
developing the service quality17
will lead to a greater willingness-to-pay for an entrance
fee. Management could compensate to some extent the costs of increased quality with
the revenue gained through dual entrance fees.
From the museum management perspective, in addition to providing satisfactory
services, public relations will be a critical factor of success for adopting a dual pricing
practice. Howard (2009) found that a majority of foreign visitors to a developing
country felt “serious challenging experiences” when they encountered dual pricing
without having prior knowledge. Thus, efforts to deliver justifiable reasons and
purposes for the fees should be announced to the visitors through various information
channels (e.g. a brochure, notice at the gate or ticket office, and on the website). This
type of persuasive communication, in line with the attribution theory, is also expected to
mitigate price unfairness, which, in turn, positively affects the WTP (Chung & Petrick,
2012). Conversely, failure to properly explain the rationale for dual pricing to the public
could damage the image of the museum or even the government (O’Hagan, 1995).
Finally, it should be emphasized that the findings of this article do not suggest that
a museum should commercialize for dealing with financial issues. Rather, a museum is
a not-for-profit institution, and it is noted that, “any commercial activities of the
museum, and any publicity relating to these, should be in accordance with a clear
policy, should be relevant to the basic educational purposes and must not compromise
the quality of collections” (Edson, 2005). It is thus recommended that the revenues
generated through entrance fees, though little in magnitude, be returned to communities
as a means of providing facilities, as well as for acquisition, conservation, and
exhibition of collections, and generally to meet the museums missions, all with the
purpose of preserving our tangible and intangible heritage.
17
The service quality could be improved, e.g., by operating English guided tours, providing audio-visual
devices, presenting useful information related to other tourism attractions, and enhancing facilities for
disabled and elderly people.
22
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25. Egbert L. W. Jongen: AN ANALYSIS OF PAST AND FUTURE GDP GROWTH IN SLOVENIA.
IER, Ljubljana, 2004, 42 p.
26. Egbert L. W. Jongen: FUTURE GDP GROWTH IN SLOVENIA: LOOKING FOR ROOM FOR
IMPROVEMENT. IER, Ljubljana, 2004, 37 p.
27. Peter Stanovnik, Marko Kos: TECHNOLOGY FORESIGHT IN SLOVENIA. IER, Ljubljana, 2005,
22 p.
28. Art Kovačič: COMPETITIVENESS AS A SOURCE OF DEVELOPMENT. IER, Ljubljana, 2005, 25 p.
29. Miroslav Verbič, Boris Majcen, Renger van Nieuwkoop: SUSTAINABILITY OF THE SLOVENIAN
PENSION SYSTEM: An ayalysis with an overlapping-generations General Equilibrium Model. IER,
Ljubljana, 2005. 24 p.
30. Miroslav Verbič: AN ANALYSIS OF THE SLOVENIAN ECONOMY WITH A QUARTERLY
ECONOMETRIC MODEL. IER, Ljubljana, 2006. 26 p.
31. Vladimir Lavrač, Boris Majcen: ECONOMIC ISSUES OF SLOVENIA'S ACCESSION TO THE EU.
IER, Ljubljana, 2006. 37 p.
32. Miroslav Verbič, Renata Slabe Erker: ECONOMIC VALUATION OF ENVIRONMENTAL VALUES
OF THE LANDSCAPE DEVELOPMENT AND PROTECTION AREA OF VOLČJI POTOK. IER,
Ljubljana, 2007. 28.p.
33. Boris Majcen, Miroslav Verbič. MODELLING THE PENSION SYSTEM IN AN OVERLAPING-
GENERATIONS GENERAL EQUILIBRIUM FRAMEWORK. IER, Ljubljana, 2007. 37 p.
34. Boris Majcen, Miroslav Verbič (corresponding author), Ali Bayar and Mitja Čok. THE INCOME TAX
REFORM IN SLOVENIA: SHOULD THE FLAT TAX HAVE PREVAILED? IER, Ljubljana, 2007.
29 p.
35. Miroslav Verbič. VARYING THE PARAMETERS OF THE SLOVENIAN PENSION SYSTEM: AN
ANALYSIS WITH AN OVERLAPPING-GENERATIONS GENERAL EQUILIBRIUM MODEL.
IER, Ljubljana, 2007. 28 p.
36. Miroslav Verbič, SUPPLEMENTARY PENSION INSURANCE IN SLOVENIA: AN ANALYSIS
WITH AN OVERLAPPING-GENERATIONS GENERAL EQUILIBRIUM MODEL. IER,
Ljubljana, 2007. 32 p.
37. Matjaž Črnigoj: RISK AVERSE INSIDERS WITH SPECIFIC OBJECTIVE FUNCTION AND
CAPITAL STRUCTURE. IER, Ljubljana, 2007. 13 p.
38. Renata Slabe Erker, Janez Filiplič: MONITORING SUSTAINABILITY FOR SLOVENIA’S
REGIONS. IER, Ljubljana, 2007, 22 p.
39. Jože P. Damijan, Črt Kostevc: TRADE LIBERALIZATION AND ECONOMIC GEOGRAPHY IN
TRANSITION COUNTRIES: CAN FDI EXPLAIN THE ADJUSTMENT PATTERN OF
REGINAL WAGES? IER, Ljubljana, 2008, 40 p.
40. Jože P. Damijan, Matija Rojec, Boris Majcen, Mark Knell: IMPACT OF FORM HETEROGENEITY
ON DIRECT AND SPILLOVER EFFECTS OF FDI: MICRO EVIDENCE FROM TEN
TRANSITION COUNTRIES. IER, Ljubljana, 2008, 25 p.
41. Jože P. Damijan, Črt Kostevc, Matija Rojec. INNOVATION AND FIRMS’ PRODUCTIVITY
GROWTH IN SLOVENIA: SENSIVITY OF RESULTS TO SECTORAL HETEROGENEITY AND
TO ESTIMATION METHOD. IER, Ljubljana, 2008, 37 p.
42. Jože P. Damijan, Jose de Sousa, Olivier Lamotte. DOES INTERNATIONAL OPENNESS AFFECT
PRODUCTIVITY OF LOCAL FORMS? EVIDENCE FROM SOUTHERN EUROPE. IER,
Ljubljana, 2008, 29 p.
43. Jože P. Damijan, Črt Kostevc, Sašo Polanec. FROM INNOVATION TO EXPORTING OR VICE
VERSA? IER, Ljubljana, 2008, 28 p.
44. Milena Bevc. DEVELOPMENT OF THE NATIONAL SYSTEM OF INTERNATIONALLY
COMPARABLE INDICATORS OF FORMAL EDUCATION – CASE STUDY FOR A NON-OECD
COUNTRY. IER, Ljubljana, 2009, 27 p.
45. Miroslav Verbič, Boris Majcen, Mitja Čok. EDUCATION AND ECONOMIC GROWTH IN
SLOVENIA: A DYNAMIC GENERAL EQUILIBRIUM APPROACH WITH ENDOGENOUS
GROWTH. IER, Ljubljana, 2009, 21 p.
46. Miroslav Verbič, Boris Majcen, Mitja Čok. R&D AND ECONOMIC GROWTH IN SLOVENIA: A
DYNAMIC GENERAL EQUILIBRIUM APPROACH WITH ENDOGENOUS GROWTH. IER,
Ljubljana, 2009, 21 p.
47. Valentina Prevolnik Rupel, Marko Ogorevc. LONG TERM CARE SYSTEM IN SLOVENIA. IER,
Ljubljana, 2010, 34 p.
48. Jože P. Damijan, Črt Kostevc. LEARNING FROM TRADE THROUGH INNOVATION: CAUSAL
LINK BETWEEN IMPORTS, EXPORTS AND INNOVATION IN SPANISH MICRODATA. IER,
Ljubljana, 2010, 30 p.
49. Peter Stanovnik, Nika Murovec. TERRITORIAL ICT KNOWLEDGE DYNAMICS IN SLOVENIA.
IER; Ljubljana, 2010, 35 p.
50. Nika Murovec, Peter Stanovnik. THE KNOWLEDGE DYNAMICS OF ICT IN SLOVENIA – Case
study. IER; Ljubljana, 2010, 59 p.
51. Vladimir Lavrač. INCLUSION OF SLOVENIA IN THE EURO AREA AND PERSPECTIVES OF
ENLARGEMENT AFTER THE GLOBAL FINANCIAL CRISIS. IER, Ljubljana, 2010. 15 p.
52. Sašo Polanec, Aleš Ahčan, Miroslav Verbič. RETIREMENT DECISIONS IN TRANSITION:
MICROECONOMETRIC EVIDENCE FROM SLOVENIA. IER, Ljubljana, 2010. 24 p.
53. Tjaša Logaj, Sašo Polanec. COLLEGE MAJOR CHOICE AND ABILITY: WHY IS GENERAL
ABILITY NOT ENOUGH? IER, Ljubljana, 2011. 41 p.
54. Marko Ogorevc, Sonja Šlander. SHAREHOLDERS AND WAGE DETERMINATION. IER, Ljubljana,
2011. 13 p.
55. Boris Majcen, Miroslav Verbič, Sašo Polanec. INNOVATIVENESS AND INTANGIBLES: THE CASE
OF SLOVENIA. IER, Ljubljana, 2011. 31 p.
56. Valentina Prevolnik Rupel, Marko Ogorevc. QUALITY COUNTRY REPORT FOR SLOVENIA. IER,
Ljubljana, 2011. 13 p.
57. Mitja Čok, Jože Sambt, Marko Košak, Miroslav Verbič, Boris Majcen. DISTRIBUTION OF
PERSONAL INOCME TAX CHANGES IN SLOVENIA. IER, Ljubljana, 2011. 13 p.
58. Miroslav Verbič, Rok Spruk, AGING POPULATION AND PUBLIC PENSIONS: THEORY AND
EVIDENCE. IER, Ljubljana, 2011. 35 p.
59. Boris Majcen, Mitja Čok, Jože Sambt, Nataša Kump. DEVELOPMENT OF PENSION
MICROSIMULATION MODEL. IER, Ljubljana, 2012. 40 p.
60. Tine Stanovnik, Miroslav Verbič. THE DISTRIBUTION OF WAGES AND EMPLOYEE INCOMES
IN SLOVENIA, 1991-2009. IER, Ljubljana, 2012. 20 p.
61. Mitja Čok, Ivica Urban, Miroslav Verbič. INCOME REDISTRIBUTION THROUGH TAX AND
SOCIAL BENEFITS: THE CASE OF SLOVENIA AND CROATIA. IER, Ljubljana, 2012. 16 p.
62. Nika Murovec, Damjan Kavaš, Aidan Cerar. CLUSTERING, ANALYSIS AND CHALLENGES OF
THE CREATIVE INDUSTRIES IN SLOVENIA. IER, Ljubljana, 2012. 18 p.
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