This paper models price movements in the market for fine art. Consumers of art are assumed to value art for its own sake, but are also subject to externalities in consumption whereby the utility of consuming the work of a painter is affected by the consumption choices of other consumers of art. Painters are arranged in space, and positive externalities arise when the painter consumed is coming into fashion; negative externalities arise when the painter is going out of fashion. Because supply is fixed, popularity can be measured by price, so externality effects can be expressed through prices. Motion to the prices arises through the presence of some consumers who are fashion leaders, driving up the prices of coming artists. Rising prices indicate rising popularity, and the market moves towards these painters, shunning those who were previously popular. The paper makes reference to a companion paper by Peter Swann which is an empirical exploration of the same phenomenon. His paper suggests that painters can effectively be placed in a circular space, which makes the spatial assumptions of the analysis in the current paper reasonable. Results on trends in prices, and steady state prices under certain conditions are derived. The model is simulated numerically to illustrate some of the dynamics that arise.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Paper provided by Maastricht : MERIT, Maastricht Economic Research Institute on Innovation and Technology in its series Research Memoranda with number
008.