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

Journal of Institutional and Theoretical Economics (JITE), Vol. 154, No. 3, pp. 546-71, 1998

26 Pages Posted: 7 Dec 2012

See all articles by Lex Borghans

Lex Borghans

Maastricht University - Department of Economics; University of Maastricht - Research Centre for Education and the Labour Market (ROA); IZA Institute of Labor Economics

Loek F. M. Groot

Utrecht University - School of Economics

Date Written: December 6, 1998

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

Suggested Citation

Borghans, Lex and Groot, Loek F. M., Superstardom and Monopolistic Power: Why Media Stars Earn More than their Marginal Contribution to Welfare (December 6, 1998). Journal of Institutional and Theoretical Economics (JITE), Vol. 154, No. 3, pp. 546-71, 1998, Available at SSRN: https://ssrn.com/abstract=2185881

Lex Borghans

Maastricht University - Department of Economics ( email )

P.O. Box 616
Maastricht, 6200 MD
Netherlands

University of Maastricht - Research Centre for Education and the Labour Market (ROA) ( email )

P.O. Box 616
Maastricht, MD6200
Netherlands

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Loek F. M. Groot (Contact Author)

Utrecht University - School of Economics ( email )

Kriekenpitplein 21-22
Adam Smith Building
Utrecht, 3584 EC
Netherlands

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