Substitution and Superstars

Tim Perri ()

No 11-14, Working Papers from Department of Economics, Appalachian State University

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

JEL-codes: D11 D31 J31 (search for similar items in EconPapers)
Date: 2011
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