William A. Luksetich

The Market Prefers Republicans: Myth or Reality

Wall Street abounds with folklore concerning aggregate stock price movements before and after Presidential elections. Some suggest that movements in the Dow Jones Industrial Average (DJIA) portend the outcome of elections. Others attribute movements in the market, prior to and after the election, to the anticipated outcome of the election. In this paper we examine some of the folklore with respect to the effect of Presidential elections on aggregate stock price movements and the implication of these movements on market efficiency.

Nonprofit Arts Organizations: Do Funding Sources Influence Spending Patterns?

Concern over the funding of nonprofit organizations has raised issues concerning the amount of money available for the provision of services and the potential that changes in the nature of funding will compromise organizational goals. Because of increased competition and government cutbacks, nonprofits will be forced to place more reliance on commercial ventures. This has the potential to negatively affect the behavior of recipient organizations. The question addressed in this article is whether greater reliance on private funding and commercial ventures will ultimately cause nonprofit arts organizations to place less emphasis on program services and more emphasis on fundraising and management expenses. The analysis is focused on three categories of nonprofit arts organizations: museums, performing arts, and media and communications. Overall, the provision of program services appears to be the primary goal of organizations in these three sectors, and greater reliance on private funding does not divert funding from program service delivery.

Government Funding and Nonprofit Organizations

In this article, the author tests whether there is a simultaneous relationship between the number of nonprofits and government funding of nonprofit activity and whether the fundraising efforts of nonprofits are the means by which nonprofits affect the grants available to them. Estimates of the model are consistent with the proposition that government grants and contracts (program revenues) received by nonprofits are strong determinants of the number of nonprofits in a state. They lend support to the argument that nonprofit fundraising activities have an independent effect on the availability of the grants and contracts; however, although the number of nonprofit organizations per state has a similar effect on grants to nonprofits, they do not have an effect on the contacts they receive.

Demand functions for museum services

Museums Worldwide are facing financial exigencies and are being forced to rely on earned income, including admission fees, to finance their activities. Using data from the 1989 Museum Surveywe estimate demand functions for seven types of museums in the United States. Previous empirial evidence on the effects of admission fees on museum attendance have either been anecdotal or case study in nature. This study presents the first general empirical evidence on factors influencing the demand for museum services. Our results provide evidence that the demand for museum services is price inelastic and that museum quality has important effects on museum demand. We also argue that out results indicate that the adverse effects of admission charges on attendance are small and relatively easy to alleviate.

Why do diners tip: rule-of-thumb or valuation of service?

When diners decide how much to tip, is the decision based on social convention or on conscientious appraisal of server productivity? Previous researchers in economics and social psychology are generally inconclusive on this question. A common finding in the literature is that tip size and service quality are unrelated, a result usually obtained from OLS regressions. OLS is only appropriate if service quality is exogenous. It is argued that service quality is very likely endogenous in any regression of tip size; good quality encourages good tips, but server expectations of good tips encourage good quality. This simultaneity is accounted for by jointly estimating percentage tips and customer rankings of service quality on a sample of 247 diners in a Central Minnesota restaurant. Included are explanatory variables consistent with both the social psychology and economic views of tipping. In contrast to previous studies, it is found that service quality significantly affects tip size and when servers expect higher tips, customers rank service quality higher. Also it is found that patronage frequency and coupon redemption have no effect on percentage tips, but server gender influences quality significantly. It is concluded that the results are generally supportive of an economic hypothesis of tipping.

The cost of producing symphony Orchestra services

The nature of cost and production relationships in nonprofit firms have been widely explored in the health and hospital area (for example, Cowing and Holtman, and Newhouse). Studies of a similar nature have been done for the arts (Lange, Luksetic and Jacobs, 1986) and the performing arts (Baumol and Bowen; Gapinski, 1980, 1984 and 1985; Globerman and Book; Hall; Lange, Luksetic, Jacobs and Billiard; Throsby). These performing arts studies, with two exceptions, have centered mainly on estimates of average cost curves for symphony orchestra concert performances.(l)

Demand elasticities for symphony orchestras

Firms in the performing arts industries like firms in nonprofit industries in general provide an interesting and fruitful area of study by economists. Research in this area by economists has been directed toward explaining the behavior of nonprofits as maximizers of some utility function, determining the elements of that utility function, and deriving the welfare implications of the observed behavior. In general, theories advanced to explain the behavior of nonprofit performing arts firms postulate that they are output maximizers, quality maximizers, or that they maximize some combination of the two goals. The firm, therefore, makes decisions on price, quality, and presumably other variables, such as promotional expenses, and attempts to choose the combination of variables under its control that maximize its objective function subject, of course, to some budget constraint. Symphony orchestras, like firms in the performing arts in general, fall into the category of nonprofit firms. These orchestras rely on public subsidies, patron contributions, and ticket revenues as major sources of funding. The willingness of the patrons of the arts to donate constitutes a major source of revenue for symphony orchestras. These contributions are presumed to be at least partially a function of the quality of the program, the season subscription price, and promotional activities. Patrons may be motivated to donate to the arts for other reasons. Contributions allow ticket prices to be held at levels which allow individuals not otherwise able to

A simultaneous model of nonprofit symphony orchestra behavior

In this paper, we test a six equation simultaneous model of nonprofit symphony orchestra behavior. The model is based on Hansmanns theory of nonprofit behavior in the performing arts. The results show that the most prestigious of the orchestras practise a pricing policy that encourages patrons to make a tax deductible contribution. In this manner, they achieve a pattern of price discrimination that, instead of increasing revenues, reduces revenues. Following conditions suggested by Hansmann, we are also able to draw conclusions about the objectives of nonprofit symphony orchestras.

Efficiency of Fund-Raising Activities: An Application of Data Envelopment Analysis

Nonprofit institutions rely heavily on unearned income to fund their activities. This unearned income arrives in the form of donations from the public and business, as well as grants from foundations and governmental agencies. Within any organization, decisions on the efficient allocation of resources are crucial. This is especially true in not-for-profit enterprises for whom the opportunities to earn income are limited and reliance on donations and grants is therefore paramount. In this article, we test the relative efficiency of the developmental spending of 78 symphony orchestras in the United States. The data are from the 1987-1988 American Symphony Orchestra Leagues Comparative Statistical Reports. We use Data Envelopment Analysis to gauge the relative efficiency of the fund-raising efforts. Orchestras deemed inefficient are given proportional, realizable input reductions that allow production of their current level of donations and grants. Regression analysis is then used to investigate the determinants of efficiency, holding constant orchestra and demographic characteristics.

Organizational Form and Nursing Home Behavior

The authors identify differences in performance among for-profit, nonprofit, and government-owned nursing homes in Minnesota. They investigate whether homes of diverse ownership types distribute their surpluses differently, if those differences narrow over time, and if the various ownership types react differently to changes in the regulatory environment. Government-owned and nonprofit homes spend more per resident day for nursing care costs than do independent for-profit homes. Chain affiliation is important in explaining persistent spending differences. There is an agency problem: Nursing homes belonging to chains behave differently from their independent counterparts. Secular non-profits belonging to national chains spend less of their surplus on nursing care costs after regulations allowed more of this form of spending to be recouped in rates charged to the residents. The secular firms affiliated with national chains spend less on nursing care than the control group. As the predicted surpluses of for-profit chains increase, the owners’ compensation falls.