A Competitive Model of (Super)Stars
AbstractThe usual explanations for superstar effects---when a firm’s revenue is positive and convex in quality, and a few firms earn a large share of market revenue---are imperfect substitution between sellers, low marginal cost of output, and marginal cost declining as quality increases. Herein, a competitive model is developed in which superstar effects occur simply because a few firms have quality significantly higher than others. No firm needs to sell more than a small percentage of market output, and cost can increase in output and in quality (the latter possibly at no more than a decreasing rate).
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Bibliographic InfoPaper provided by Department of Economics, Appalachian State University in its series Working Papers with number 04-09.
Date of creation: 2004
Date of revision: 2005
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- D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
- D41 - Microeconomics - - Market Structure and Pricing - - - Perfect Competition
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-07-03 (All new papers)
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