Is it worth subsidising regional repertory theatre?

Subsidies to the performing arts are usually justified by reference to externality and public goods arguments that are hard to quantify. We suggest that subsidies to theatres may be appropriate because of their inability to engage in spatial price discrimination to capture consumer surplus. For one major theatre, we use audience data and the Clawson-Knetsch travel cost method to assess the extent of consumer surplus and find that it exceeds the level of subsidy received from public sources. On the basis of this example, current subsidy levels are justifiable even without recourse to traditional externality/public goods arguments.