QUANTITATIVE METHODS FOR CULTURAL ECONOMICS

The course is an introduction to the formal analysis of decision and evaluation processes, with a special attention questions that emerge in the management of cultural organizations. It is thought as a theoretical course whose pursue is to develop the quantitative tools needed for real-world applications.

The goal of the course is to develop the following abilities:
1) Identify and structure complex decision problems within cultural organizations, clearly distinguishing between decision alternatives, external uncertainties, and consequences.
2) Utilize quantitative analytical tools (payoff matrices and decision trees) to evaluate artistic projects and cultural investments under conditions of both total ignorance and risk.
3) Analyze strategic interactions between cultural sector actors (competition among museums, labor or artist negotiations) using fundamental Game Theory concepts.
4) Critically assess the value of information and the effectiveness of market research, integrating purely economic goals with criteria for cultural utility and social impact.

During the course it is assumed that students already know some mathematical subjects covered in secondary school courses. In particular it will be required some familiarity with the solution of equations, the graphical representation of elementary functions and vectors.

The program is organized into four main chapters that guide students from the logical structuring of problems to the management of uncertainty and strategic interactions.

1) Problem Formulation: Anatomy of a decision problem; identification of decision alternatives, states of nature, and consequences; formal representation techniques using payoff matrices and decision trees.
2) Understanding Risk and Probability: Introduction to elementary tools for assessing uncertainty; calculation of event probabilities and the algebra of states; application of Bayes' rule for updating probabilities based on new information or industry studies.
3) Uncertainty and Evaluation: Decision criteria in the absence of probabilities (Maximin, Maximax, Minimax Regret); Expected Value analysis and risk profiles; calculation of the Expected Value of Perfect and Sample Information (EVPI and EVSI); introduction to Utility Theory for weighting non-monetary objectives.
4) Strategic Interaction: Fundamentals of Game Theory; representation in normal and extensive forms; analysis of dominant strategies and Nash Equilibrium; applications to sequential games (backward induction), negotiation, and cooperation dilemmas.

David Vella, Invitation to Linear Programming and Game Theory, Cambridge University Press, 2021.

Other study material will be given by the teacher on the Moodle platform.

The final evaluation is based on a written exam with numerical and theoretical questions. At the discretion of the teacher, it may be required an oral part.

written and oral

Regarding the grading scale:
A. Scores in the range of 18-22 will be awarded for:
- sufficient knowledge and applied understanding of the program;
- sufficient ability to solve the proposed problems;
- limited ability to explain the mathematical procedures underlying the solution of the proposed exercises.

B. Scores in the range of 23-26 will be awarded for:
- fair knowledge and applied understanding of the program;
- fair ability to solve the proposed problems;
- fair ability to explain the mathematical procedures underlying the solution of the proposed exercises.

C. Scores in the range of 27-30 will be awarded for:
- good or excellent knowledge and applied understanding of the program;
- good or excellent ability to solve the proposed problems;
- good or excellent ability to explain the mathematical procedures underlying the solution of the proposed exercises.
D. Honors will be awarded for:
- excellent knowledge and applied understanding of the program, and an outstanding ability to present and explain the solution of the exercises.

The course consist in 15 in person classes devoted to the theoretical aspects of the subject, its applications and the resolution of exercises. Additional reading material will be provided.