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Discuss the importance of network effects-skill and luck

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a) Explain the main idea behind superstar theory. Discuss the importance of network effects, skill and luck.

"Superstar theory" argues that growth in top incomes is driven by a growth in market size. Before 1980 the average size and CEO pay gap was weak, after 1980 it got stronger.

b) How does the superstar theory explain the trend in CEO compensation?

c) Is there evidence consistent with the superstar theory explanation of the trend in CEO pay? Is there evidence inconsistent with it?

Reference no: EM132278930

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