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Auction House Guarantees for Works of Art

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  • Hamilton, Jonathan
  • Graddy, Kathryn

Abstract

Auction houses use both in-house and third-party guarantees for sellers who are concerned about the risk that not enough bidders will enter the auction for their works. Auction houses are compensated for guarantees by buyers? commissions and successful sales after attracting important works of art. Sellers compensate third-party guarantors by splitting the excess of the final sale price over the guarantee. The guarantor can bid in the auction, and at Christie's, the third-party guarantor still receives a share of the difference between the winning price and the guarantee price, even if he wins the auction, which means the guarantor has a ?toehold?. We explore the effect of guarantees (both in-house and third-party) on prices in art auctions, using a large database of auctions and a smaller database of repeat sales.

Suggested Citation

  • Hamilton, Jonathan & Graddy, Kathryn, 2014. "Auction House Guarantees for Works of Art," CEPR Discussion Papers 9996, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:9996
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    Cited by:

    1. Penasse, J.N.G. & Renneboog, L.D.R., 2014. "Bubbles and Trading Frenzies : Evidence from the Art Market," Other publications TiSEM bf0d8984-df7f-4f02-afc7-3, Tilburg University, School of Economics and Management.
    2. Spaenjers, Christophe & Goetzmann, William N. & Mamonova, Elena, 2015. "The economics of aesthetics and record prices for art since 1701," Explorations in Economic History, Elsevier, vol. 57(C), pages 79-94.
    3. Federico Etro & Elena Stepanova, 2015. "The Market for Paintings in Paris between Rococo and Romanticism," Kyklos, Wiley Blackwell, vol. 68(1), pages 28-50, February.
    4. repec:rim:rimwps:17-25 is not listed on IDEAS

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    Keywords

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    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media
    • Z11 - Other Special Topics - - Cultural Economics - - - Economics of the Arts and Literature
    • Z18 - Other Special Topics - - Cultural Economics - - - Public Policy

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