untalented but successful olivier gergaud univ. de reims – univ. paris 1 joint with vincenzo...
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Untalented but Successful
Olivier GERGAUDUniv. de Reims – Univ. Paris 1
Joint with
Vincenzo VERARDICRED, Namur
Réactions :
« On aimerait que Libé ouvre ses colonnes à des économistes qui bossent sur de vrais sujets, plutôt que de s'amuser dans la cour de récré », Victoria Beckham
« Laisser les économistes jouer dans la cour d'école c'est aussi leur permettre de repenser la théorie classique […] Il n'y a qu'en se posant des questions iconoclastes que la science économique avance », Captain Cavern
Rosen (1981) : talent basedSmall differences in talent can lead to large earnings differences and eventually to the emergence of superstars. Inferior talent is not a substitute for superior talent.
Adler (1985) : talent independentStars can even emerge among equally-talented individuals. Network effects.
Theory of Superstars: Fundamentals
Rosen (1981) : talent based
Inferior talent is not a substitute for superior talent.
Theory of Superstars: Fundamentals
Mother
Adler (1985): talent independent (network)
Theory of Superstars: Fundamentals
Mother
Adler (2005) p.3, “Superstars [...] are individuals who attain considerable prominence and success in their field and whose earnings as a result are significantly greater than the earnings of their competitors”.
Superstars phenomenon : Adler (2005)
Superstars phenomenon : Adler (2005)
"Superstars attain earnings significantly greater than their competitors"
Meaning: For a similar level of talent, some individuals will be valued more than others.
Talent: definition
Talent \Tal"ent\, n. [F., fr. L. talentum]
1. Among the ancient Greeks, a weight and a denomination of money equal to 60 min[ae] or 6,000 drachm[ae].
Webster's Revised Unabridged Dictionary (1913)
Talent: definition (cont.)
Webster's Revised Unabridged Dictionary (1913)
4. Intellectual ability, natural or acquired; mental endowment or capacity; skill in accomplishing; a special gift, particularly in business, art, or the like; faculty.
Are Rosen-MacDonald and Adler Theories of Superstars complementary?
Motivation
Emergence of superstars may be…
… The reward for a greater talent: à la Rosen (1981) Hamlen (1991) Hamlen (1994) Lucifora and Simmons (2003)
… Independent of talent: à la Adler (1985) Blass (1992) Chung and Cox (1994)
Empirical Evidence : Fuzzy
Emergence of superstars may be…
… The reward for a greater talent: à la Rosen (1981) Hamlen (1991) Hamlen (1994)
… Independent of talent: à la Adler Blass (1992) Chung and Cox (1994)
Empirical Evidence : Fuzzy
(Music) Link quality of voice and sales but find no evidence of Rosen’s effect
Emergence of superstars may be…
… The reward for a greater talent: à la Rosen (1981) Lucifora and Simmons (2003) :
Empirical Evidence : Fuzzy
(Soccer) convex structure of rewards but measure of talent questionable, endogenous (# of goals) : weak evidence of a Rosen effect
“If we think of the top three players as the best players in Italian football measured by our goals per season indicator, then […] our results are consistent with Rosen’s (1981) theory of superstars”, Lucifora and Simmons (03)
Emergence of superstars may be…
… The reward for a greater talent: à la Rosen (1981) Hamlen (1991); Hamlen (1994).
… Independent of talent: à la Adler (1985) Blass (1992)
Empirical Evidence : Fuzzy
(Baseball) finds evidence against Rosen: experience is more important than talent
Emergence of superstars may be…
… The reward for a greater talent: à la Rosen (1981) Hamlen (1991); Hamlen (1994).
… Independent of talent: à la Adler (1985) Chung and Cox (1994)
Empirical Evidence : Fuzzy
(Music) find evidence against Rosen, there is a snowball effect on CD sold, success is the result of a prob. mechanism which predicts that “artistic outputs will be concentrated among a few lucky individuals”
How to test theories of superstars?
Use data where:
Talent is objectively measurable There is no unobserved heterogeneity Superstars exist Rarity can be separated from talent Earning is measured with precision Role of agents or managers is negligible
In other words, use quasi-experimental data
Solution: Quasi-experimental dataset
Pokemon TCG
Solution: Quasi-experimental dataset
Pokemon TCG All characteristics of monsters are available Talent is objectively summarized in a one-
dimensional indicator Superstars are present Trading prices are available Objective rarity is provided There are no agents …
(i.e. )
Supply of the cards First-hand market: 19 decks in 2000
Not included: 65% [1,4] times: 32% > 4 times: 3% No individual prices. Bad cards >>> Very good cards.
Second-hand market: Retailers, specialized games shops or websites Individual cards Individual prices. SCRYE: Median price charged by retail outlets
across the US and Canada.
A sample card
Number
NameHit Points
Type
Power
Level
Pokemon Data
Attack Cost
Weakness and
Resistance
12
Attack Damage
A sample card
Number
NameHit Points
Type
Power
Level
Pokemon Data
Attack Cost
Weakness and
Resistance
76
Attack Damage
Advantages of our dataset
Talent (Level): fully observable, totally objective, explicitly provided in the cards.
Supply : exogenously controlled by a single firm.
Price : measure of success, proxy for consumers' preferences.
13$
Rosen effect 20$
4152
Convexity: « Greater magnification of
the earnings-talent gradient increasing
sharply near the top of the scale. »
Adler effect?
12 20
1.5$
0.5$
Snowball effect: «Superstars may emerge
even among equally-talented individuals»
The empirical procedure
First step: Estimate a Robust Hedonic Price Function for the
Pokémon TCG
Second step: Detect outliers via a simple (robust) analysis of the
residuals and determine the fair price for all individuals
Third step: Graph the overprized individuals
Fourth step: Estimate a Reweighted Hedonic Price Function for the
Pokémon TCG
Classical regression
Z
P
OLS
Masking effect
Superstar
Superstar
Superstar
Swamping effect
Robust regression
Z
P
Robust regression
Superstar
Superstar
Superstar
LTS regression : Intuition
Decide a percentage of trimming (α%) that indicates the degree of resistance to outliers.
Run OLS on all samples having (1-α%) of the data
Choose the regression with the best fit
LTS regression: example
N = 100 & trimming 25%
Number of sub samples:
Number of sub samples: 2.42 1023
100 100!
75 75!25!
2.42 1023??
Fast-LTS algorithm:
based on the min # ofsub samples guaranteeingat least one non-corrupt sample
The Specification
i 0 i 1 i 2 i 3 i 4 i iLog(p )= +Z +SET +SUP +RAR +f(LEVEL )+
Rosen effect
Creature's characteristics
Card's setting
Supply conditions
Rarity
Observed priceConvex
The Specification
i 0 i 1 i 2 i 3 i 4 i iLog(p )= +Z +SET +SUP +RAR +f(LEVEL )+
The Specification
Estimate robust residuals (ri ) by LTS
i 0 i 1 i 2 i 3 i 4 i iLog(p )= +Z +SET +SUP +RAR +f(LEVEL )+
The Specification
Estimate robust residuals (ri ) by LTS
Overpricing can be estimated by:
2
iˆ
-r -i 2
i
p-1=exp 1
p̂
i 0 i 1 i 2 i 3 i 4 i iLog(p )= +Z +SET +SUP +RAR +f(LEVEL )+
How to test Rosen effect?
1. Run a reweighted least squares hedonic price function
2. Check if we observe a convexity
Results
… …
10 20 30 40 50 60 70 80 90 100
15
20
25
30
35
40Graphically
Talent
Pri
ce
GyaradosCharizard
Predicted by Rosen
Blastoise
Predicted by Adler
Venusaur
Identifying Superstars (year 2000)• Who is sold at more than 25% of its fair price?
Pikachu
Squirtle
Charizard
Blastoise
Alakazam
-100
Fair Price
100
200
300
400
Und
erp
ricin
dg
& O
verp
ricin
g (
%)
0.0
1.0
2.0
3.0
4.0
5D
ensi
ty
0 20 40 60 80Talent
Evolution of Superstars
Alakazam
Blastoise
Charizard
Pikachu
Squirtle
25
50
75
Fair Price
100
125
200
300
150
175
225
250
275
-25
-50
-75
-100
Ove
rpric
ing
& U
nder
pric
ing
(%
)
03-
00
07-
00
09-
00
11-
00
01-
01
04-
02
10-
02
01-
03
Period
Conclusion: Innovations
Original Dataset: Collectible cards
Robust estimation methods
Original Results…
Conclusion: Original Results
Rosen (81) and Adler (85): complementary
Untalented but Successful: why not !!!
“We are all made of stars”
Untalented but Successful
Olivier GERGAUDUniversité de Reims
Joint with
Vincenzo VERARDICRED - Namur
Electrode
Pikachu
Talented - Unsuccessful
Untalented - Successful
On the job market !