Sponsorship for the sustainability of historical-architectural heritage: Application of a model's original test finalized to maximize the profitability of private investors

This paper deals with private sponsorship as a tool for the redevelopment of Italy’s vast wealth of historical-architectural public heritage sites. Italian law provides for the stipulation of sponsorship agreements by and between public sector agencies or entities (which need financial resources to restore or re-qualify property) and private sector investors (which guarantee the capital sought by the public sector in exchange for significant returns on their investments) raising various economic issues, particularly in connection with the profitability thresholds for private sector investors in return for the public sector’s use of their financial resources. In this paper, the authors focus on how private sector investors determine how much of their businesses turnover constitutes the optimal percentage level of overall income that may be invested in sponsorships to maximize business profitability. For this purpose, a model based on past works on the subject (Bucci et al., 2003) has been chosen by the authors. Such model gives a solution for verifying a sponsorship’s profitability. This model is static and is applicable to single-product companies that invest in sponsorships, under the theories of monopolistic competition and of Cobb-Douglas production function. Our objectives are to present this model, explaining in detail the mathematical steps, simplifying the model where possible in order to reduce the levels of complexity in its application, and finally to apply it to real case scenarios of cultural sponsorships