Cost Structure and Product Mix of Local Public Theatres

Abstract

The purpose of this study is to analyse the cost structure of the Italian local public theatres in order to assess economies of scale and scope and the desirability of the reform of the subsidy system. A translog multiproduct cost function was estimated using panel data for a sample of 28 theatres over the period 1991–1993. The results indicate the existence of scale and scope economies for most output levels. In addition, the estimated marginal costs for the two outputs indicate that, ceteris paribus, an additional performance conducted inside or outside the theatre by the resident theatre group is generally more expensive than an additional performance conducted inside the theatre by external theatre groups. These results call for a reform of the public subsidy system which do not promote the proliferation, but the interchange and the diffusion of a limited number of high quality shows.