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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

Suggested Citation

  • Timothy Perri, 2011. "Substitution and Superstars," Working Papers 11-14, Department of Economics, Appalachian State University.
    • Handle: RePEc:apl:wpaper:11-14
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    File URL: http://econ.appstate.edu/RePEc/pdf/wp1114.pdf
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    References listed on IDEAS

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    1. Rosen, Sherwin, 1983. "The Economics of Superstars: Reply," American Economic Review, American Economic Association, vol. 73(3), pages 460-462, June.
    2. 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 546-546, September.
    3. Alan B. Krueger, 2005. "The Economics of Real Superstars: The Market for Rock Concerts in the Material World," Journal of Labor Economics, University of Chicago Press, vol. 23(1), pages 1-30, January.
    4. Timothy Perri, 2013. "A Competitive Model of (Super)Stars," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 39(3), pages 346-357.
    5. Rosen, Sherwin, 1981. "The Economics of Superstars," American Economic Review, American Economic Association, vol. 71(5), pages 845-858, December.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    superstars; imperfect substitutes; and convex earnings;
    All these keywords.

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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