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Sale Rates and Price Movements in Art Auctions

  • Orley C. Ashenfelter
  • Kathryn Graddy

The failure of many paintings to sell in art auctions indicates the presence of reserve prices set by sellers. This paper examines the relationship between sale rates and price surprises over time in art auctions. Using data on contemporary and impressionist art, we show that while sale rates appear to have little relationship to current prices, there exists a strong positive relationship of sale rates to unexpected aggregate price changes, which is reminiscent of a Phillips curve. As a result, sale rates provide a useful quantity indicator of the strength of the art market. The data also indicate that sale rates revert to "normal" very quickly following a price surprise. We estimate an empirical model to measure normal sale rates. We also find evidence that the reserve price is set on average at about 70% of the auctioneer's low estimate, as published in the auction catalog.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 16743.

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Date of creation: Jan 2011
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Publication status: published as Orley Ashenfelter & Kathryn Graddy, 2011. "Sale Rates and Price Movements in Art Auctions," American Economic Review, American Economic Association, vol. 101(3), pages 212-16, May.
Handle: RePEc:nbr:nberwo:16743
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  1. Kathryn Graddy & Orley Ashenfelter, 2002. "Auctions and the Price of Art," Economics Series Working Papers 131, University of Oxford, Department of Economics.
  2. Graddy, Kathryn, 2006. "Art Auctions," Handbook of the Economics of Art and Culture, Elsevier.
    • Orley Ashenfelter & Kathryn Graddy, 2010. "Art Auctions," Working Papers 1212, Princeton University, Department of Economics, Center for Economic Policy Studies..
  3. Mortensen, Dale T, 1970. "Job Search, the Duration of Unemployment, and the Phillips Curve," American Economic Review, American Economic Association, vol. 60(5), pages 847-62, December.
  4. Clare McAndrew & James L Smith & Rex Thompson, 2012. "The impact of reserve prices on the perceived bias of expert appraisals of fine art," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 27(2), pages 235-252, 03.
  5. Madeleine DE LA BARRE & Sophie DOCCLO & Victor GINSBURGH, 1994. "Returns of Impressionist, Modern and Contemporary European Paintings 1962-1991," Annales d'Economie et de Statistique, ENSAE, issue 35, pages 143-181.
  6. Ashenfelter, Orley, 1989. "How Auctions Work for Wine and Art," Journal of Economic Perspectives, American Economic Association, vol. 3(3), pages 23-36, Summer.
  7. Baumol, William J, 1986. "Unnatural Value: Or Art Investment as Floating Crap Game," American Economic Review, American Economic Association, vol. 76(2), pages 10-14, May.
  8. Orley Ashenfelter & Kathryn Graddy, 2011. "Art Auctions," Chapters, in: A Handbook of Cultural Economics, Second Edition, chapter 2 Edward Elgar.
    • Orley Ashenfelter, 2003. "Art auctions," Chapters, in: A Handbook of Cultural Economics, chapter 3 Edward Elgar.
    • Orley Ashenfelter & Kathryn Graddy, 2010. "Art Auctions," Working Papers 1212, Princeton University, Department of Economics, Center for Economic Policy Studies..
  9. Madeleine de la Barre & Sophie Docclo & Victor Ginsburgh, 1994. "Returns of impressionist, modern and contemporary European painters, 1962-1991," ULB Institutional Repository 2013/1723, ULB -- Universite Libre de Bruxelles.
  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. Goetzmann, William N, 1993. "Accounting for Taste: Art and the Financial Markets over Three Centuries," American Economic Review, American Economic Association, vol. 83(5), pages 1370-76, December.
  12. 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.
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