A behavioral economic analysis of excess entry in arts labor markets

Labor markets in the arts often have excessive supply. While economists have recognized that key reasons for excess entry are behavioral in nature, the issue has never been analyzed systematically or in depth. A behavioral economic approach is used to show how numerous known biases can lead to a larger number of entrants in arts markets than would occur in other markets. In addition, special attention is paid to unusual motivations for supplying labor. In particular, the role of intrinsic reward are broken down along with its implications on labor supply and product quality.

Research highlights▶ A number of behavioral factors can lead to excess entry in art labor markets, many of which are the result of known behavioral biases. ▶ These biases cause labor market entrants to overestimate their own quality, underestimate competitor quality, underestimate applicant pool size, overestimate payoffs, and make errors in understanding the selection process. ▶ Non-pecuniary reward is also important and comes in a number of types. ▶ The type of non-pecuniary reward involved has implications for market dynamics and for the quality of output.