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Auction guarantees for works of art

Listed author(s):
  • Graddy, Kathryn
  • Hamilton, Jonathan

This paper addresses the question of whether auction guarantees change the bidding environment and whether they cause a change in price once the value of an item is taken into account. We analyze both the cases of third-party guarantees and in-house guarantees. We use two datasets: one of Christie’s and Sotheby’s Contemporary and Impressionist Evening Sales from January 2010 to February 2012 and another larger dataset consisting of all items auctioned at Christie's from 2001 to May 2011. While more expensive items are more likely to have guarantees, we find little empirical evidence to suggest an effect on price from the guarantee itself once the value of the item is taken into account.

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File URL: http://www.sciencedirect.com/science/article/pii/S0167268116302591
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Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

Volume (Year): 133 (2017)
Issue (Month): C ()
Pages: 303-312

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Handle: RePEc:eee:jeborg:v:133:y:2017:i:c:p:303-312
DOI: 10.1016/j.jebo.2016.11.005
Contact details of provider: Web page: http://www.elsevier.com/locate/jebo

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  2. Singh, Rajdeep, 1998. "Takeover Bidding with Toeholds: The Case of the Owner's Curse," Review of Financial Studies, Society for Financial Studies, vol. 11(4), pages 679-704.
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  4. Ashenfelter, Orley, 1989. "How Auctions Work for Wine and Art," Journal of Economic Perspectives, American Economic Association, vol. 3(3), pages 23-36, Summer.
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  6. BAUWENS, Luc & GINSBURGH, Victor, "undated". "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).
  7. Alan Beggs & Kathryn Graddy, 2008. "Failure to meet the reserve price: the impact on returns to art," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 32(4), pages 301-320, December.
  8. Jianping Mei & Michael Moses, 2005. "Vested Interest and Biased Price Estimates: Evidence from an Auction Market," Journal of Finance, American Finance Association, vol. 60(5), pages 2409-2435, October.
  9. De Silva, Dakshina G. & Pownall, Rachel A.J. & Wolk, Leonard, 2012. "Does the sun ‘shine’ on art prices?," Journal of Economic Behavior & Organization, Elsevier, vol. 82(1), pages 167-178.
  10. Riley, John G & Samuelson, William F, 1981. "Optimal Auctions," American Economic Review, American Economic Association, vol. 71(3), pages 381-392, June.
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  12. Horstmann, Ignatius J & LaCasse, Chantale, 1997. "Secret Reserve Prices in a Bidding Model with a Resale Option," American Economic Review, American Economic Association, vol. 87(4), pages 663-684, September.
  13. Klemperer, Paul, 1998. "Auctions with almost common values: The 'Wallet Game' and its applications," European Economic Review, Elsevier, vol. 42(3-5), pages 757-769, May.
  14. Maskin, Eric S & Riley, John G, 1984. "Optimal Auctions with Risk Averse Buyers," Econometrica, Econometric Society, vol. 52(6), pages 1473-1518, November.
  15. Eric A. Greenleaf & Ambar G. Rao & Atanu R. Sinha, 1993. "Guarantees in Auctions: The Auction House as Negotiator and Managerial Decision Maker," Management Science, INFORMS, vol. 39(9), pages 1130-1145, September.
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