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The paradox of being unsold: hidden signaling value of bought-in in Korean art auction

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  • Seohyeon Hwang

    (Hongik University)

  • Jiye Ryu

    (Hongik University)

  • Kihoon Hong

    (Hongik University)

Abstract

This study investigates how the bought-in is related to the future returns of artworks in the Korean auction market. Employing a repeat-sales model and a dataset from Seoul Auction and K-Auction (1998–2024), the analysis indicates that artworks previously experienced bought-in tend to yield total returns approximately 14.4% lower than those without such an experience. This result suggests that the bought-in may function as a negative signal of value, possibly due to the slow diffusion of information in the art market. Furthermore, the study finds that declining prices can establish new valuation benchmarks, which, in turn, appear to shape market participants’ perceptions. These findings contribute to the literature on market efficiency and behavioral economics by providing evidence of anchoring and loss aversion in auction settings. The study also reconsiders the economic role of the reserve price, highlighting its protective function in stabilizing values within a volatile and information-sensitive market. In practical terms, the insights offered here underscore the importance of data-driven strategies for setting reserve prices and designing auctions to enhance transparency, mitigate inefficiencies, and foster long-term market sustainability.

Suggested Citation

  • Seohyeon Hwang & Jiye Ryu & Kihoon Hong, 2025. "The paradox of being unsold: hidden signaling value of bought-in in Korean art auction," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 49(3), pages 639-658, September.
    • Handle: RePEc:kap:jculte:v:49:y:2025:i:3:d:10.1007_s10824-025-09535-3
    DOI: 10.1007/s10824-025-09535-3
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    JEL classification:

    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • Z11 - Other Special Topics - - Cultural Economics - - - Economics of the Arts and Literature

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