A theory of co-production as joint household production with illustrations from the arts

Abstract

Co-production is prevalent in the arts but current usage of the term is loose and insufficiently grounded in economic theory. We propose a baseline theory of non-contractual co-production between producer and consumer, where we theorize co-production as a form of household production. In this baseline scenario, co-production is unproblematic because it is in the self-interest of both consumer and producer to deliver the required resources. From this baseline scenario we first relax the assumption of individual household production to analyze situations of joint co-production. The performing arts are an exemplary instance where audience members co-produce ‘the atmosphere.’ Jointness of consumption generates a collective action problem in co-production leading to the (potential) underprovision of (certain elements of) the co-produced good. We identify various market and institutional solutions which have emerged in the performing arts to prevent such underprovision. The second assumption we relax is that producer and co-producers agree on the desired characteristics of the good. We argue that a divergence in preferences in combination with other economic factors such as high fixed costs can explain the emergence of extensive co-production in fan-cultures. From this theory we develop various suggestions for the empirical study of co-production, especially how to explain success or failure of co-production. Although our analysis is restricted to artistic market goods, our framework has implications for the likelihood of co-production by citizens of public goods, which are typically characterized by both jointness of co-production and disagreement over the preferred characteristics of the good.