Bailout

The economics of kissing-and-telling

By Felix Salmon

Now that it’s obvious that Tiger Woods has had affairs, why would he pay millions of dollars to buy silence from the “Tiger lilies”?

What’s the marginal cost to Tiger of the publication of explicit details about an affair, over and above the cost of the revelation of that affair in the first place?

How did Tiger (and, presumably, his lawyers) arrive at the amount of money by which he would increase his wife’s prenup in the wake of the revelations?

What mechanism is responsible for the fact that as soon as one lily emerges, the rest all tumble out into the open? What credible signal can a bar girl send to a celebrity of Tiger’s magnitude that she won’t sell her salacious story for millions or effectively blackmail him? And is there some kind of unspoken pact between Las Vegas bar girls and their clientele that no one should ever be the first to be outed, but that there’s no shame in being the third or fifth? Or is it just that it becomes easier to sell your story in the midst of a feeding frenzy like the one we’re seeing right now?

Then there’s the tabloids: wouldn’t they pay more for the first kiss-and-tell story than for the fourth? Do they, too, get caught up in the frenzy? Or does the frenzy itself increase the value of these stories?

Enquiring minds want to know!

(Picture: REUTERS/Danny Moloshok)

Full post as published by Macroprudential on December 07, 2009 (boomark / email).