Question

What type of market is the ‘Superstar’ market referred to by Alan Krueger ? Briefly justify your answer.

Answer 1

Economist A K referred to the superstar market as the rock and roll market because two ingredients: scale and non-substitutability creates the superstar. Music is the perfect example of a superstar market comprising of few players who have a huge fan following and thus, make a lot of money. Superstar is successful in dominating a particular market as it is able to influence its customer base or the audience. This is known as scale. The products or the services provided by them are unique with distinctive features.

In this market, limited supply induces greater demand and that increases the higher prices. However, in this case, artists generally remain fearful of charging unfair prices. Thus, in this market, emotions of fans also play an important role in concert ticket pricing. However, the price discrimination used helps to increase revenue. For example, charging high prices for the front seat.

However, the same situation can be seen in the music industry that occurs in a simple demand and supply economic model.