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Failure to Meet the Reserve Price: The Impact on Returns to Art

Author

Listed:
  • Alan Beggs
  • Kathryn Graddy

Abstract

This paper presents an empirical study of paintings that have failed to meet their reserve price at auction. In the art trade it is often claimed that when an advertised item goes unsold at auction, its future value will be affected. We have constructed a new dataset specifically for the purpose of testing this proposition. To preview our results, we find that paintings that come to auction and failed return significantly less when they are eventually sold than those paintings that have not been advertised at auction between sales. These lower returns may occur because of common value effects, idiosyncratic downward trends in tastes, or changes in the seller`s reserve price.

Suggested Citation

  • Alan Beggs & Kathryn Graddy, 2006. "Failure to Meet the Reserve Price: The Impact on Returns to Art," Economics Series Working Papers 272, University of Oxford, Department of Economics.
  • Handle: RePEc:oxf:wpaper:272
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    File URL: http://www.economics.ox.ac.uk/materials/working_papers/paper272.pdf
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    References listed on IDEAS

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    1. Steven D. Levitt & Chad Syverson, 2008. "Market Distortions When Agents Are Better Informed: The Value of Information in Real Estate Transactions," The Review of Economics and Statistics, MIT Press, vol. 90(4), pages 599-611, November.
    2. Orley Ashenfelter & Kathryn Graddy, 2011. "Art Auctions," Chapters,in: A Handbook of Cultural Economics, Second Edition, chapter 2 Edward Elgar Publishing.
      • Orley Ashenfelter & Kathryn Graddy, 2010. "Art Auctions," Working Papers 1212, Princeton University, Department of Economics, Center for Economic Policy Studies..
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    5. BAUWENS, Luc & GINSBURGH, Victor, 2000. "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).
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    13. Goetzmann, William Nelson, 1992. "The Accuracy of Real Estate Indices: Repeat Sale Estimators," The Journal of Real Estate Finance and Economics, Springer, vol. 5(1), pages 5-53, March.
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    Citations

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    Cited by:

    1. William N. Goetzmann & Luc Renneboog & Christophe Spaenjers, 2011. "Art and Money," American Economic Review, American Economic Association, vol. 101(3), pages 222-226, May.
    2. Kathryn Graddy & Jonathan Hamilton, 2014. "Auction House Guarantees for Works of Art," ACEI Working Paper Series AWP-02-2014, Association for Cultural Economics International, revised May 2014.
    3. 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.
    4. Orley Ashenfelter & Kathryn Graddy, 2011. "Art Auctions," Chapters,in: A Handbook of Cultural Economics, Second Edition, chapter 2 Edward Elgar Publishing.
      • Orley Ashenfelter & Kathryn Graddy, 2010. "Art Auctions," Working Papers 1212, Princeton University, Department of Economics, Center for Economic Policy Studies..
    5. William Goetzmann & Elena Mamonova & Christophe Spaenjers, 2014. "The Economics of Aesthetics and Three Centuries of Art Price Records," NBER Working Papers 20440, National Bureau of Economic Research, Inc.
    6. Chanont Banternghansa & Kathryn Graddy, 2011. "The impact of the Droit de Suite in the UK: an empirical analysis," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 35(2), pages 81-100, May.
    7. Seth C. Anderson & Robert B. Ekelund & John D. Jackson & Robert D. Tollison, 2016. "Investment in early American art: the impact of transaction costs and no-sales on returns," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 40(3), pages 335-357, August.
    8. repec:pri:cepsud:203ashenfelter is not listed on IDEAS
    9. A. Collins & A. E. Scorcu & R. Zanola, 2007. "Sample Selection Bias and Time Instability of Hedonic Art Price Indexes," Working Papers 610, Dipartimento Scienze Economiche, Universita' di Bologna.
    10. Marinelli, Nicoletta & Palomba, Giulio, 2011. "A model for pricing Italian Contemporary Art paintings at auction," The Quarterly Review of Economics and Finance, Elsevier, vol. 51(2), pages 212-224, May.
    11. Graddy, Kathryn & Hamilton, Jonathan, 2017. "Auction guarantees for works of art," Journal of Economic Behavior & Organization, Elsevier, vol. 133(C), pages 303-312.

    More about this item

    Keywords

    Reserve Prices; Burning; Bought-in; Art; Auctions;

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media

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