Superstar Effects in Deluxe Gastronomy – An Empirical Analysis of Value Creation in German Quality Restaurants

Thomas Ehrmann, Brinja Meiseberg and Christian Ritz

Kyklos, 2009, vol. 62, issue 4, 526-541

Abstract: We analyze whether superstar effects (disproportionate income effects) exist in the deep‐pocket market for quality gastronomy in Germany, and what factors determine the stars' rents. In quality gastronomy, the stars can be the restaurant chefs. Building on Rosen's (1981) and Adler's (1985) central theories on star effects, we explore two potential sources of stardom. Following Rosen (1981), we test if quality differences between the chefs' performances have a direct effect on financial rewards (“direct superstar effect”). Following Adler (1985), we assess the income effect of a media presence of chefs (“classical Superstar effect”). Through this, we deal with an economic issue of general interest: does it pay more to develop your skills in your core business to perfection, or to maintain the current level of skills and invest in self‐marketing? Analyzing a sample of 288 restaurants, for potential star effects by differences in quality, we find that higher quality increases chefs' revenues. Yet, revenues do not increase disproportionately, and achieving higher quality requires substantial investments in exquisite ingredients, excellent staff and prime ambience. This problem, also called the “agony of the stars”, has manifested itself in the bankruptcies of European three‐star restaurants in recent years. As regards potential star effects by differences in media presence, we observe a positive impact of TV appearances on financial rewards. Yet, these income effects are moderate as well, so there is neither a direct, nor a classical superstar effect in quality gastronomy. We argue that although both perfection of skills and self‐marketing have similarly positive income effects, self‐marketing seems both the less risky and the less stressful way to enhance income.

Date: 2009
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