The article "The Economics of Superstars" by Sherwin Rosen explores the phenomenon of individuals earning disproportionately large amounts of money and dominating their respective fields. Rosen argues that this concentration of output and income is not merely an illusion of inflation but a real economic phenomenon. He identifies two key elements: the close connection between personal reward and market size, and the tendency for both market size and reward to be skewed towards the most talented individuals. Rosen uses a special type of assignment problem, where buyers are assigned to sellers, to model the market dynamics. He assumes that the distribution of talent is fixed and observable, and that the price and market size of services are determined by a function of talent. The convexity of the revenue function implies that income distributions are skewed towards the top, with small differences in talent leading to larger earnings differences. The analysis considers both internal and external diseconomies, where the quality of service provided by sellers decreases as market size increases. This leads to a concentration of output among a few highly talented individuals. Rosen also discusses the implications for market equilibrium, including the impact of changes in demand and supply on the distribution of rewards. Overall, Rosen's work provides a theoretical framework for understanding why certain individuals in various fields, such as comedy, classical music, and economics, earn significantly more than others, and why this phenomenon is likely to persist in the future.The article "The Economics of Superstars" by Sherwin Rosen explores the phenomenon of individuals earning disproportionately large amounts of money and dominating their respective fields. Rosen argues that this concentration of output and income is not merely an illusion of inflation but a real economic phenomenon. He identifies two key elements: the close connection between personal reward and market size, and the tendency for both market size and reward to be skewed towards the most talented individuals. Rosen uses a special type of assignment problem, where buyers are assigned to sellers, to model the market dynamics. He assumes that the distribution of talent is fixed and observable, and that the price and market size of services are determined by a function of talent. The convexity of the revenue function implies that income distributions are skewed towards the top, with small differences in talent leading to larger earnings differences. The analysis considers both internal and external diseconomies, where the quality of service provided by sellers decreases as market size increases. This leads to a concentration of output among a few highly talented individuals. Rosen also discusses the implications for market equilibrium, including the impact of changes in demand and supply on the distribution of rewards. Overall, Rosen's work provides a theoretical framework for understanding why certain individuals in various fields, such as comedy, classical music, and economics, earn significantly more than others, and why this phenomenon is likely to persist in the future.