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Price and Death

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  • Jun-ichi Itaya
  • Heinrich Ursprung

Abstract

How does an artist’s death impact on the price of his or her works of art? We investigate this question in an infinite-horizon dynamic general equilibrium setting. Employing the open-loop Stackelberg equilibrium concept to describe the interactive behaviour of collectors and artists, we find that the art price remains at some well-defined "pseudo-competitive" level as long as the artist is alive. Only when the artist unexpectedly dies, the price increases on impact. This so-called death effect varies negatively with the artist’s age at death. If it is well known that an artist is ailing from some terminal illness and his or her death thus does not come as a surprise, the price of the ailing artist’s work increases when the news of the ailment is divulged; the price immediately jumps to the level which will prevail at the time when the artist dies.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2008/wp-cesifo-2008-02/cesifo1_wp2213.pdf
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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2213.

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Date of creation: 2008
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Handle: RePEc:ces:ceswps:_2213

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Related research

Keywords: art prices; durable-goods monopoly; Stackelberg equilibrium;

References

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  1. Coase, Ronald H, 1972. "Durability and Monopoly," Journal of Law and Economics, University of Chicago Press, vol. 15(1), pages 143-49, April.
  2. Driskill, Robert, 1997. "Durable-Goods Monopoly, Increasing Marginal Cost and Depreciation," Economica, London School of Economics and Political Science, vol. 64(253), pages 137-54, February.
  3. Karp, L., 1992. "Depreciation erodes the coase conjecture," Discussion Paper Series In Economics And Econometrics 9210, Economics Division, School of Social Sciences, University of Southampton.
  4. David Maddison & Anders Jul Pedersen, 2008. "The death effect in art prices: evidence from Denmark," Applied Economics, Taylor & Francis Journals, vol. 40(14), pages 1789-1793.
  5. BAUWENS, Luc & GINSBURGH, Victor, . "Art experts and auctions are pre-sale estimates unbiased and fully informative?," CORE Discussion Papers RP -1485, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  6. Corinna Czujack, 1997. "Picasso Paintings at Auction, 1963–1994," Journal of Cultural Economics, Springer, vol. 21(3), pages 229-247, September.
  7. Kahn, Charles M, 1986. "The Durable Goods Monopolist and Consistency with Increasing Costs," Econometrica, Econometric Society, vol. 54(2), pages 275-94, March.
  8. Andrew C. Worthington & Helen Higgs, 2004. "Art as an investment: risk, return and portfolio diversification in major painting markets," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 44(2), pages 257-271.
  9. Nancy L. Stokey, 1981. "Rational Expectations and Durable Goods Pricing," Bell Journal of Economics, The RAND Corporation, vol. 12(1), pages 112-128, Spring.
  10. Chanel, O. & Gerard, L.A. & Ginsburgh, V., 1992. "The Relevence of Hedonic Price Indices the Case of Paintings," G.R.E.Q.A.M. 92a19, Universite Aix-Marseille III.
  11. R. Ekelund & Rand Ressler & John Watson, 2000. "The ``Death-Effect'' in Art Prices: A Demand-Side Exploration," Journal of Cultural Economics, Springer, vol. 24(4), pages 283-300, November.
  12. Buiter, W, 1982. "Saddlepoint Problems in Continuous Time Rational Expectations Models : A General Method and Some Macroeconomic Examples," The Warwick Economics Research Paper Series (TWERPS) 200, University of Warwick, Department of Economics.
  13. Jianping Mei & Michael Moses, 2002. "Art as an Investment and the Underperformance of Masterpieces," American Economic Review, American Economic Association, vol. 92(5), pages 1656-1668, December.
  14. Ginsburgh, Victor & Mei, Jianping & Moses, Michael, 2006. "The Computation of Prices Indices," Handbook of the Economics of Art and Culture, Elsevier.
  15. David W. Galenson & Bruce A. Weinberg, 2000. "Age and the Quality of Work: The Case of Modern American Painters," Journal of Political Economy, University of Chicago Press, vol. 108(4), pages 761-777, August.
  16. Pesando, James E, 1993. "Art as an Investment: The Market for Modern Prints," American Economic Review, American Economic Association, vol. 83(5), pages 1075-89, December.
  17. Dockner,Engelbert J. & Jorgensen,Steffen & Long,Ngo Van & Sorger,Gerhard, 2000. "Differential Games in Economics and Management Science," Cambridge Books, Cambridge University Press, number 9780521637329, April.
  18. Victor Ginsburgh & David Throsby, 2006. "Handbook of the economics of art and culture," ULB Institutional Repository 2013/1673, ULB -- Universite Libre de Bruxelles.
  19. Bond, Eric W. & Samuelson, Larry, 1987. "The Coase conjecture need not hold for durable good monopolies with depreciation," Economics Letters, Elsevier, vol. 24(1), pages 93-97.
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Cited by:
  1. John Galbraith & Douglas James Hodgson, 2009. "Dimension Reduction and Model Averaging for Estimation of Artists’ Age-Valuation Profiles," CIRANO Working Papers 2009s-41, CIRANO.

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