Superstardom and Monopolistic Power: Why Media Stars Earn More than their Marginal Contribution to Welfare

Abstract

In this paper we develop in two steps an argument which shows that superstar incomes exceed their marginal contribution to welfare. Firstly, we argue that superstar incomes can only exist if two conditions are met: there should indeed be talents differences, but also that the superstar is able to exploit monopolistic power due to his number one position. Secondly, we introduce an elementary probablistic model that shows that the existence of such monopolistic powers explains the stylized facts considering superstars, while the presumption that high incomes are completely generated by differences in talents, is rejected by this model.

Keywords: superstar economics, monopolistic power

JEL Classification: D62, J31