Contracts Between Art and Commerce

Richard E. Caves

Journal of Economic Perspectives, 2003, vol. 17, issue 2, 73-83

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.

Date: 2003
Note: DOI: 10.1257/089533003765888430
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