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Monopolistic competitive market in religion: A case study of Hindu temples

Article  in  Applied Economics Letters · January 2008

DOI: 10.1080/13504850600706214 · Source: RePEc

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 Applied Economics Letters, 2007, 1–4, iFirst
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Monopolistic competitive market in

religion: a case study of Hindu
temples
Tuhin K. Das*,a and Ishita Datta Rayb
a
Department of Economics, Jadavpur University, Kolkata 700032, India
b
Eastern Institute for Integrated Learning in Management, Kolkata 700069

The objective of this article is to examine, based on field survey, the market
behaviour of the Hindu temples in India. The cost and revenue functions
have been estimated for the Hindu temples, and it has been found that the
market of Hindu temples does not strictly follow the monopoly models.
The estimated average revenue curve has been observed to be slightly
negatively sloped. Moreover, like perfect competition here exist a large
number of small temples with easy entry and exit. The actions of any single
temple do not have significant impact on the other temples in the market.
Thus is resembles the monopolistic competition model rather than the pure
monopoly model.

I. Introduction efficient than that of free market. That is one of the

Adam Smith stated the Medieval Catholic Churches
as the example of religious monopoly that had
enjoyed super-normal profit by limiting the level of
output and charging price higher than the marginal
cost. Recent researches conducted by some
economists have re-established the opinion of Smith
that like any other monopoly these churches also
enjoy producer’s surplus and give birth to deadweight
losses (Anderson, 1989; Ekelund et al., 1989). Apart
from monopoly, there exists ‘public religion’, which is
provided by the State to its citizens free of cost or at a
very nominal price. The expense of such a provision is
financed through taxes imposed on general people,
and the government controls the quality and quantity
of the religious products.
According to Iannaccone (1991), even if public
religion is provided free of cost, the overall level of
religious consumption might be lower than that of a
relatively competitive market. Iannaccone has also
asserted that state-supported religious system is less
major reasons behind the prevalence of religion in
USA (Ferguson and Lee, 1997). Finke and Stark
(1988), with the help of a detailed time series analysis,
maintained that in USA church-membership
increased steadily throughout the last century as the
religious market in USA became more and more
diversified and competitive. On the other hand,
either the state-controlled or the monopolized reli-
gious markets in Northern European countries
explain the reason behind their comparative
indifference towards religious services. According
to the Rational Choice Theory, the State churches
in Europe are highly monopolistic in nature, and
the lack of choice has severely reduced the
demand for religion in the European countries
(Davie, 2000).
The present work is also to study the market
structure of the Hindu temples and to examine their
market potential. For the purpose of the study a
number of Hindu temples in the State of West Bengal
in India have been surveyed.

*Corresponding author. E-mail: tuhinkdas@vsnl.net

Applied Economics Letters ISSN 1350–4851 print/ISSN 1466–4291 online ß 2007 Taylor & Francis 1
http://www.tandf.co.uk/journals
DOI: 10.1080/13504850600706214
 2 T. K. Das and I. D. Ray
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II. Methodology to celebrate different religious festivals and rituals.

It has been observed that the annual growth rate of
the places of worship is much higher in West Bengal
(5.23) compared to the national growth rate of the
same (Das and Datta Ray, 2005). Moreover, the
percentage shares of West Bengal in the total number
of places of worship in India in the year 1991 (8.41%)
and 2001 (9.52%) are greater than that of many other
states in the country. For this reason, in the present
study attention has been focused on West Bengal, and
this state has been considered as the area of study.
The report of Census, 2001 shows an increasing trend
in the number of places of worship in all the districts
of the State (Census, 2001). However, the rate of
increase was not uniform in all the districts. In some
districts, it was less than 1%, whereas in some
districts the growth rate was more than 10%.
Among these districts, Kolkata and North 24
Parganas were selected for sample survey. These
two districts possess 8.6 and 11.7% annual growth
rate of the places of worship, respectively. Altogether
eighteen temples were surveyed to obtain religion
related data.
All of these temples were privately owned,
although there had been a variation in ownership
type. Some of these temples were owned and
managed by individuals, whereas trusty boards
govern in some cases. Elected committees also were
observed to manage temples. In the last two cases,
any surplus generated at the temples was transferred
to bank accounts in the name of temple committees,
and the accumulated amounts were sometimes spent
for the temple renovation, expansion and ceremonial
purposes. The average number of visitors at a temple
was 80 180 per year, i.e. nearly 220 per day. Nearly
5% of the average visitors per day were surveyed in
the year 2003–2004 from each temple to estimate the
revenue earning at these places of worship. It is to
mention here that only the cost components of the
temples were collected from the temple authorities
(not the revenue earned).
They also spend money to give salaries to the
employees of the temples. The expenditures incurred
by a temple on different heads constitute the total
costs of the temple. In this work the total cost of a
temple per day has been assumed as a simple linear
function of the number of daily visitors to that
temple, and has been estimated as follows:
TC ¼ 107:9967 þ 0:285169
Vq ð1Þ
Equation 1 shows that the total cost (TC) per day
incurred by a temple increases as the number of daily
visitors (Vq) to that temple increases. The average
cost (AC) function and the marginal cost (MC)
function of a temple are then derived from
Equation 1 and plotted in Fig. 1. The figure shows
the estimated average cost curve and marginal cost
curve of a temple, which are plotted against different
number of daily visitors (Vq) to that temple.
The primary source of income of any temple is the
money contributed to the temple by the visitors.
The money contributed by the visitors for purchasing
the religious services in the temples at each visit has
been assumed in this study as the price per unit of
religious services. This price is nothing but the
average revenue (AR) earned by the temples.
The frequency of visits (Fq) by a visitor has been
assumed to be a linear function of the price (or AR)
paid by a visitor at each visit to the temple. It has
been estimated as
AR ¼ 6:881035  0:01029
Fq ð2Þ
IV. Nature of the Market
The AR and MR curves derived form Equation 2 are
also plotted in Fig. 1. The average revenue curve is
13

11

9 AR
MR
Revenue, cost

7 AC
III. Estimation of Cost and Revenue MC
Functions 5

3
A number of devotees visit these temples each day. 1
They contribute money in these temples at the time of
−1
paying homage to the deities of the temples.
The money contributed by the devotees as homage −3
10
30
50
70
90

0
0
0
0
0
0
0
0
0
0
0
0

constitutes the major portion of the income of these

11
13
15
17
19
21
23
25
27
29
31
33

Frequency of visits (number of visitors)

temples. The temple authorities, on the other hand,
spend money for the maintenance of the temples and Fig. 1. Revenue and cost functions of Hindu temples
 A case study of Hindu temples 3
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observed to be slightly negatively sloped, indicating estimate a new cost function. The estimated new total
that the market of temples does not strictly follow the cost function is
monopoly models. Like perfect competition, here
TC ¼ 1036:702398 þ 0:311686
Vq ð3Þ
exist a large number of small temples with easy entry
and exit. The actions of any single temple do not have The new AC and MC curves derived from (3), along
significant effect on other temples in the market. Thus with the AR and MR curves are shown in Fig. 2. It
it resembles the monopolistic competition model looks more like a monopolistic competitive market in
rather than the pure monopoly model. The profit long-run. It is well known that in the long-run, the
maximizing output in monopolistic competition average revenue and the average cost curves are
occurs at the number of visitors (Fq
) where marginal tangent at the profit maximizing output (Gould and
revenue equals marginal cost. The corresponding Lazear, 1991). The point of tangency of these two
price (P
) is determined by the demand curve (i.e. curves are Fq
¼ 285 and P
¼ 3.95. These values are
AR curve). So, solving equations for MC, AR and closer to the observed values than the previous
MR we get the profit maximizing output, Fq
¼ 320 results.
and P
¼ 3.58. The estimated Fq
is higher than the
average number of visitors (equal to 220) to a temple
per day, and the estimated price is lower than the
average contribution (equal to 5.21) made by a visitor V. Conclusion
per visit to a temple.
The difference between the estimated values and Like monopolists, Hindu temples earned short-run
the observed values of both Fq
and P
arises due to economic profits when cost of land was not significant
the fact that, today, an important cost component in (Fig. 1). Those economic profits induced other temples
initiating a temple is the high cost of land. Most of to enter into the market. But possession of a land is the
the new temples are located in the prime areas of a major prerequisite for entry into this market. So,
locality so that these temples could be easily construction of new temples is continuing in those
accessible for the target group. But the high cost of places where lots of people congregate. Otherwise, a
land in a prime area compelled the new temples to temple might suffer economic loss. Providing religious
possess lesser quantity of land than that possessed by services by constructing a new temple at present is
the older temples (the correlation coefficient between quite easy because there is no entry barrier, now a day,
the age of the temples and land area is 0.6023). On the in the market of Hindu religion.
other hand, smaller land possessed by the temples Another aspect of the market of religion is also
sometimes cause congestion in the temple premises. worth mentioning. Here building a new temple does
Which, in turn, disrupts the law and order situation not mean that the devotees will immediately discard
in the locality. the older ones, because some emotional factor is
Generally, cost of land is assumed to be a fixed always there as far as religion is concerned.
cost, but in this study certain percentage of this cost Generally, devotees visit not only the new temples
has been incorporated as rent in the total cost to but also the older ones out of superstitions. As a
result, the downward shift of the long-run AR curve,
which is a common phenomenon in case of secular
117
commodities and services, is not applicable for the
religious services like temples. On the contrary, the
97 long-run AC curve in the case of temples shifts
AR upwards, because in the long-run if the rent of land is
77
incorporated, then the average costs incurred by the
Revenue, cost

MR
AC
57 MC
temples increase. Moreover, congregation in a temple
creates environmental, and law and order problems
37 in the neighbourhood of the temples. Also temples
are occasionally built encroaching the land illegally.
17
All these factors culminate into some ‘under
−3 the table payments’, which ultimately increase the
10
30
50
70
90

0
0
0
0
0
0
0
0
0
0
0
0

total cost of running the temples in the long-run. As a

11
13
15
17
19
21
23
25
27
29
31
33

Frequency of visits (number of visitors) result, the profits earned from the temples decline in
Fig. 2. Revised revenue and cost functions of Hindu the long-run. Hence, it may be inferred that each
temples temple earns only the normal profit in the long-run.
 4 T. K. Das and I. D. Ray
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Census of India (2001) Series 20, Tables on Houses and
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Davie, G. (2000) Prospects for Religion in the Modern
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