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Contracts Between Art and Commerce

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  • Richard E. Caves

Abstract

Contract structures used in the arts and entertainment industries are central to understanding their economic organization. The structures spring from common bedrock traits of these industries--pervasive product differentiation, all costs sunk, consumers' valuations unpredictable, artists having tastes for how creative work is done. Joint-venture structures are common, with revenue (not profit) shared. Advances to artists help bring incentive and distributive goals into consistency, as do long-term contracts covering successive cycles of the artist's output. Real option contracts allow the efficient allocation of decision rights in a project on which collaborators work successively.

Suggested Citation

  • Richard E. Caves, 2003. "Contracts Between Art and Commerce," Journal of Economic Perspectives, American Economic Association, vol. 17(2), pages 73-83, Spring.
  • Handle: RePEc:aea:jecper:v:17:y:2003:i:2:p:73-83
    Note: DOI: 10.1257/089533003765888430
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    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/089533003765888430
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    References listed on IDEAS

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    1. Weinstein, Mark, 1998. "Profit-Sharing Contracts in Hollywood: Evolution and Analysis," The Journal of Legal Studies, University of Chicago Press, vol. 27(1), pages 67-112, January.
    2. Michael Kremer, 1993. "The O-Ring Theory of Economic Development," The Quarterly Journal of Economics, Oxford University Press, vol. 108(3), pages 551-575.
    3. Chisholm, Darlene C, 1997. "Profit-Sharing versus Fixed-Payment Contracts: Evidence from the Motion Pictures Industry," Journal of Law, Economics, and Organization, Oxford University Press, vol. 13(1), pages 169-201, April.
    4. Hansmann, Henry & Kraakman, Reinier, 1992. "Hands-Tying Contracts: Book Publishing, Venture Capital Financing, and Secured Debt," Journal of Law, Economics, and Organization, Oxford University Press, vol. 8(3), pages 628-655, October.
    5. Rosen, Sherwin, 1981. "The Economics of Superstars," American Economic Review, American Economic Association, vol. 71(5), pages 845-858, December.
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