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Substitution and Superstars

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  • Timothy Perri

Abstract

The existing superstar model (Rosen 1981) does not require imperfect substitutes and explains the convexity of total earnings with respect to talent due to higher output for those with the most talent. We develop a model that explains why per unit earnings (wages or prices) would increase at an increasing rate in talent. Imperfect substitution results due to the probabilistic nature of production. Costs to consumers from repeated consumption---multiple surgeries for example--- are neither necessary nor sufficient for convexity in wages. Key Words: Superstars, imperfect substitutes, and convex earnings

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Paper provided by Department of Economics, Appalachian State University in its series Working Papers with number 11-14.

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Date of creation: 2011
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Handle: RePEc:apl:wpaper:11-14

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  1. Lex Borghans & Loek Groot, 1998. "Superstardom and Monopolistic Power: Why Media Stars Earn More Than Their Marginal Contribution to Welfare," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 154(3), pages 546-, September.
  2. Timothy Perri, 2004. "A Competitive Model of (Super)Stars," Working Papers 04-09, Department of Economics, Appalachian State University, revised 2005.
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