Rock and Roll Bands, (In) complete Contracts and Creativity

Abstract

Members of a rock and roll band are endowed with different creativity. They match and eventually obtain credit for song writing as well as a share of the returns from sales. More creative members increase the probability of success but may also claim a larger share of the pie. In our theoretical model, the nature of matching (postive or negative assortative) as well as the covariation between the probability of having a “hit” and the dispersion of credits given to individual members are a function of the completeness of contracting. When members adopt a “gentleman’s agreement” to share credits equally, the covariation between the probability of a hit and the dispersion of credits is negative, which is the consequence of positive assortative matching in creativity. The data show that the relation between dispersion and success is significantly negative, and that rock bands are thus likely to sign incomplete contracts.