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Reputation, Price, and Death: An Empirical Analysis of Art Price Formation

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  • Heinrich Ursprung
  • Christian Wiermann

Abstract

We analyze how an artist’s death influences the market prices of her works of art. Death has two opposing effects on art prices. By irrevocably restricting the artist’s oeuvre, prices, ceteris paribus, increase when the artist dies. On the other hand, an untimely death may well frustrate the collectors’ hopes of owning artwork that will, as the artist’s career progresses, become generally known and appreciated. By frustrating expected future name recognition, death impacts negatively on art prices. In conjunction, these two channels of influence give rise to a hump-shaped relationship between age at death and death-induced price changes. Using transactions from fine art auctions, we show that the empirically identified death effects indeed conform to our theoretical predictions. We derive our results from hedonic art price regressions, making use of a data set which exceeds the sample size of traditional studies in cultural economics by an order of magnitude.

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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2237.

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Date of creation: 2008
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Handle: RePEc:ces:ceswps:_2237

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Keywords: art price formation; death effect; durable goods monopoly;

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References

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  1. 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.
  2. Koenker, Roger W & Bassett, Gilbert, Jr, 1978. "Regression Quantiles," Econometrica, Econometric Society, vol. 46(1), pages 33-50, January.
  3. Andrew Worthington & Helen Higgs, 2006. "A Note on Financial Risk, Return and Asset Pricing in Australian Modern and Contemporary Art," Journal of Cultural Economics, Springer, vol. 30(1), pages 73-84, March.
  4. Victor Ginsburgh & Sheila Weyers, 2006. "Creativity and Life Cycles of Artists," Journal of Cultural Economics, Springer, vol. 30(2), pages 91-107, September.
  5. Sebastian Edwards, 2004. "The Economics of Latin American Art: Creativity Patterns and Rates of Return," JOURNAL OF LACEA ECONOMIA, LACEA - LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION.
  6. Koenker,Roger, 2005. "Quantile Regression," Cambridge Books, Cambridge University Press, number 9780521608275, October.
  7. Rosen, Sherwin, 1981. "The Economics of Superstars," American Economic Review, American Economic Association, vol. 71(5), pages 845-58, December.
  8. Frey, Bruno S. & Eichenberger, Reiner, 1995. "On the rate of return in the art market: Survey and evaluation," European Economic Review, Elsevier, vol. 39(3-4), pages 528-537, April.
  9. 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.
  10. 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.
  11. Coase, Ronald H, 1972. "Durability and Monopoly," Journal of Law and Economics, University of Chicago Press, vol. 15(1), pages 143-49, April.
  12. Victor Ginsburgh & David Throsby, 2006. "Handbook of the economics of art and culture," ULB Institutional Repository 2013/1673, ULB -- Universite Libre de Bruxelles.
  13. David W. Galenson & Bruce A. Weinberg, 2001. "Creating Modern Art: The Changing Careers of Painters in France from Impressionism to Cubism," American Economic Review, American Economic Association, vol. 91(4), pages 1063-1071, September.
  14. Ginsburgh, Victor & Mei, Jianping & Moses, Michael, 2006. "The Computation of Prices Indices," Handbook of the Economics of Art and Culture, Elsevier.
  15. Richard J. Agnello, 2002. "Investment Returns and Risk for Art: Evidence from Auctions of American Paintings," Eastern Economic Journal, Eastern Economic Association, vol. 28(4), pages 443-463, Fall.
  16. 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.
  17. Sebastian Edwards, 2004. "The Economics of Latin American Art: Creativity Patterns and Rates of Return," NBER Working Papers 10302, National Bureau of Economic Research, Inc.
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Cited by:
  1. Christoph Safferling & Aaron Lowen, 2011. "Economics in the Kingdom of Loathing: Analysis of Virtual Market Data," Working Paper Series of the Department of Economics, University of Konstanz 2011-30, Department of Economics, University of Konstanz.
  2. Galbraith, John W. & Hodgson, Douglas J., 2012. "Dimension reduction and model averaging for estimation of artists' age-valuation profiles," European Economic Review, Elsevier, vol. 56(3), pages 422-435.
  3. Ünsal Özdilek, 2013. "Visual autocorrelation of prices," Journal of Cultural Economics, Springer, vol. 37(2), pages 203-223, May.

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