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The Economics of Superstars and Celebrities von Nüesch, Stephan (eBook)

  • Erscheinungsdatum: 08.05.2008
  • Verlag: DUV Deutscher Universitäts-Verlag
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The Economics of Superstars and Celebrities

Stephan Nüesch investigates the driving forces of superstar and celebrity emergence, the efficiency of superstar salaries in professional sports, and the star attraction of superstars and celebrities both in sports and in the media. The author provides an economic theory of very famous but trivial celebrities. Dr. Stephan Nüesch war Assistent von Prof. Dr. Egon Franck am Lehrstuhl für Unternehmensführung und -politik der Universität Zürich. Dort ist er jetzt als Oberassistent tätig.


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The Economics of Superstars and Celebrities

2 Talent, Past Consumption and/or Popularity - Are Outstanding German Soccer Players Rosen or Adler Stars? (p. 17)

2.1 Introduction

While clubs overbid each other and pay enormous transfer fees and salaries for socalled superstars, other players receive comparably low remuneration. But what makes a soccer player a superstar? In the literature there are basically two competing theories of superstar formation proposed by Rosen (1981) and Adler (1985). Whereas Rosen (1981) stresses clearly observable talent superiority in order to explain the emergence of superstars, Adler (1985) maintains that besides talent, also past consumption and popularity influence stardom.

The question to be addressed in this chapter is: Are outstanding soccer players Rosen or Adler stars? Using data on individual market values and a set of personal characteristics of all soccer players appearing in the first German league in the 2004/05 season for more than half an hour, I differentiate between Rosen's and Adler's theory of superstar formation. Running quantile regressions I find empirical evidence that variables associated to Adler's theory contribute to the explanation of market value differentials in German soccer. Thus, not only investments in physical talent but also the cultivation of popularity is an adequate strategy for becoming a superstar.

The remainder of the chapter is organized as follows. Section 2.2 illustrates the two alternative theories of superstar formation. Section 2.3 presents the related literature. In section 2.4 the hypothesis is motivated. Subsequently, I explain the main features of the data and give some stylized facts on German soccer. The variables and the method used as well as the results are presented in section 2.6. Section 2.7 concludes.

2.2 Theories of Superstar Formation

Theories of superstar formation agree that superstars emerge in the provision of certain services where large economies of scale on the supply side are combined with high appreciation on the demand side. The technology of soccer games facilitates the reproduction of the service at low cost. The cost of production is largely independent of the size of the audience (Lucifora &, Simmons, 2003).

Since most of the costs are up-front, average costs decrease with consumed output. Large soccer stadiums and various media allow many paying spectators to observe a soccer game simultaneously, while at the same time enabling teams to exclude non-paying customers. Thus, there are no issues of free riding due to non-exclusion. The World Cup, the European Championship or even just a game of the German Bundesliga can attract a remarkably large audience all over the world by television broadcast.

As a result of these large economies of scale, only few sellers are needed to serve the whole market. However, large economies of scale do not guarantee high salaries for a restricted number of players. In addition, these players have to be perceived as very scarce so that demand becomes highly concentrated on their services (Rosen &, Sanderson, 2001). While on the supply side both Rosen (1981) and Adler (1985) agree on the necessity of large economies of scale, their explanation of the demand for superstar services is different.

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