first draft courtesy Wikipedia

Sherwin Rosen (1981) examined the economics of superstars to determine why “relatively small numbers of people earn enormous amounts of money and seem to dominate the fields in which they engage.” Rosen argues that in superstar markets, small differences in talent at the top of the distribution will translate into large differences in revenue. Rosen points out that ...sellers of higher talent charge only slightly higher prices than those of lower talent, but sell much larger quantities; their greater earnings come overwhelmingly from selling larger quantities than from charging higher prices

Robert Frank and Philip Cook's book "The Winner-Take-All Society" describes how a small number of superstars have come to dominate in the artistic and cultural sphere: "Winner-take-all markets have proliferated in part because technology has greatly extended the power and reach of the planet's most gifted performers....Now that most music we listen to is prerecorded...the world's best tenor can be literally everywhere at once.”13]Alan B. Krueger's studies of the concept of the "superstar" in popular music indicate that "the top 5% of revenue generators took in 62% of concert revenue in 1982 and 84% in 2003", as demand for "superstar" performers increased.[14

edit Debate over Superstardom

Some scholars argue that superstardom has a useful role in society. Callois cites Rawls, who states that the “premiums earned by scarce natural talents . . . serve to cover the costs of training and to encourage the efforts of learning, as well as to direct ability to where it best furthers the common interest.”15 Cowen (2000) cites Rosen (1981) to argue that "the superstars effect is welfare-improving (consumers get better performances) even if it leads to raising income inequality," and adds that the "superstar phenomenon should not be overstressed. Indeed, fame is a positive-sum game, not a negative nor a zero-sum one." Cowen states that "countervailing forces operate, such as a convergence of quality that limits the ability of the very best stars to dominate the market for long, or more radically the elastic supply of fame." This means that when demand for fame increases, the numbers of prizes, rewards and whatever fame generating distinctions is rising too.

On the other hand, it has been argued "compensation systems that resemble prizes lotteries can also create perverse incentives by discouraging cooperative behaviour and may encourage some contestants to disrupt the performance of competitors".17 As well, Frank and Cook (1995) have called "into question the way the winner-take-all markets operate, with their damaging features." They argue that the "winner-take-all payoff structure of competition for superstardom generates a spiral of individual and social occupational waste, since it leads both to increasing (monetary and non-monetary) reward inequalities and to overcrowdings in the markets and occupations prone to an overestimation of one’s chance to succeed." Thus as a result, they argue that "when excess numbers of contestants are induced to invest in performance enhancement in order to rise their individual odds of winning, these investments will be mutually offsetting and socially inefficient; end consumers may get more valuable products but the social cost are excessive."

edit The "Superstar's Curse"

Arthur De Vany and W. David Walls use the term “superstar’s curse” to describe the risk involved in contracting "superstar" or "A-list" actors for feature films. De Vany and Wells claim that the "curse" exists because "..if superstars are paid their expected contribution to profit, their movies almost surely will lose money." They claim that this phenomenon occurs because film profits exhibit a "stable Paretian distribution" with a "finite mean and infinite variance" and a skewed shape that contributes to creating the “superstar’s curse”.18

Boldrin and Levine point out that the "puzzling aspect of superstardom derives from the fact that, more often than not, the perceivable extent to which a superstar is a better performer or produces a better good than the lesser members of the same trade is very tiny." Boldrin and Levine predict that "superstars should abound in industries where the main product is information which can be cheaply reproduced and distributed on a massive scale". They note that this ...is the case for the worlds of sport, entertainment, and arts and letters, which coincides with the penetrating observations that motivated Rosen's original contribution [on superstardom].