Abstract
A theoretical model is presented demonstrating how the quality of art output can fall when competition intensifies. When search costs are high, additional entries beyond a certain threshold are not reviewed, leading to no quality improvement from increasing the number of products in the pool of potential entries beyond this point. Furthermore, adding marginal quality products into the pool can dilute the quality of the pool. When firms have perfect judgment, the product selected is the best in the pool making dilution of the pool unimportant. However, when firms make large errors in judging the quality of entries, the quality of the selected product will fall when the average quality in the pool falls. A simulation model is utilized in addition to an analytical model to show likely outcomes with reasonable model parameters.
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Notes
This occurs because the quality for each submission comes from the same distribution so the chance that the firm’s quality evaluation of the nth manuscript, qf,n, is higher than qf,i for manuscripts 1 to n−2 AND (qf,n > qf,n−1) must be less than the chance that qf,n−1 is higher than qf,i for manuscripts 1 to n−2. Since qf,i is an unbiased estimate of qi, each marginal submission provides a smaller increase to expected quality. This and other key results of the model are more fully demonstrated in a longer version of the paper available on request from the author.
Realistically it is reasonable to suspect that artists have biases in evaluating their own work, however such behavioral considerations, though important, are beyond the scope of this model.
Though these propositions are intuitive, they are more fully demonstrated in a longer version of the paper available on request from the author.
This occurs because as n* gets smaller, the chance of being considered, n*/N, becomes smaller at an equal rate for all entries, but the reduction in n* disproportionately helps lower quality entries more than the higher quality entries in their chance of being the best rated by the firm within n*.
As with the mathematical model, more detailed discussion of the simulation model structure is contained in a longer version of this paper available from the author on request.
This is a simplification of what is at times a complex cost structure and is intended as an average cost. While it may cost less than this for a low level publishing house employee to conduct a very cursory review of the first few pages of a book proposal, having one person conduct a full review of a book submission would likely cost more, while books that go to the more complex levels of review where several high level editors and managers study the manuscript would cost considerably more. A very short and simple acting audition might cost less, but even a 5 min review/audition for an acting part where several high level people are involved (such as the director, producer, etc.) could cost considerably more when the summed value of the time of all of these highly paid decision-makers is taken into account. Likewise a screenplay pitch to a high-level studio executive that makes half million dollars a year could have an opportunity cost of time that is easily $25 or more even if it lasts only 5 min.
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Acknowledgments
The author would like to thank the participants at the Third European Workshop on Applied Cultural Economics (and discussant Roberto Cellini in particular) as well as the editor and referees at the Journal of Cultural Economics for many useful comments received on earlier versions of this manuscript.
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Frank, J. Perverse outcomes of intense competition in the popular arts and its implications for product quality. J Cult Econ 32, 215–224 (2008). https://doi.org/10.1007/s10824-008-9071-1
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DOI: https://doi.org/10.1007/s10824-008-9071-1