IDEAS home Printed from https://ideas.repec.org/p/rim/rimwps/17-25.html
   My bibliography  Save this paper

Understanding the artwork pricing: some theoretical models

Author

Listed:
  • Francesco Angelini

    () (Department of Economics, University of Bologna, Italy)

  • Massimiliano Castellani

    () (Department of Economics, University of Bologna, Italy; The Rimini Centre for Economic Analysis)

Abstract

This paper analyses the pricing of artworks created by an artist and sold for the first time in the art market, investigating the price-formation mechanism at work in the private art market. Assuming price-maximizing agents with both full and asymmetric information on market powers and reserve prices, a bargaining game theory approach is used to explore all possible channels (paths) that a new artwork can take to reach a collector or an auction house. The paper aims to identify the relationships between the artwork prices and the market power of agents operating in each channel of the market, and analyse the role information on private art market price formation. In the full-information model, the market power of each agent is key to identify the market channel that will be preferred by the artist and, then, her incentive in creating a new artwork. In the asymmetric-information model, assuming artists, galleries, and collectors have different levels of information on the quality of the artworks and on the characteristics of the artists, the potential disappointment for the sophisticated collectors and undertreatment for the unsophisticated ones emerge.

Suggested Citation

  • Francesco Angelini & Massimiliano Castellani, 2017. "Understanding the artwork pricing: some theoretical models," Working Paper series 17-25, Rimini Centre for Economic Analysis.
  • Handle: RePEc:rim:rimwps:17-25
    as

    Download full text from publisher

    File URL: http://www.rcea.org/RePEc/pdf/wp17-25.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Sylvie Lupton, 2005. "Shared quality uncertainty and the introduction of indeterminate goods," Cambridge Journal of Economics, Oxford University Press, vol. 29(3), pages 399-421, May.
    2. Spiegler, Ran, 2014. "Bounded Rationality and Industrial Organization," OUP Catalogue, Oxford University Press, number 9780199334261.
    3. Guido Candela & Massimiliano Castellani & Pierpaolo Pattitoni & F. Marta L. Lascio, 2016. "On Rosen’s and Adler’s hypotheses in the modern and contemporary visual art market," Empirical Economics, Springer, vol. 51(1), pages 415-437, August.
    4. Graddy, Kathryn & Hamilton, Jonathan, 2014. "Auction House Guarantees for Works of Art," CEPR Discussion Papers 9996, C.E.P.R. Discussion Papers.
    5. Yuen Leng Chow & Isa E. Hafalir & Abdullah Yavas, 2015. "Auction versus Negotiated Sale: Evidence from Real Estate Sales," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 43(2), pages 432-470, June.
    6. Bulow, Jeremy & Klemperer, Paul, 1996. "Auctions versus Negotiations," American Economic Review, American Economic Association, vol. 86(1), pages 180-194, March.
    7. David A. Reinstein & Christopher M. Snyder, 2005. "THE INFLUENCE OF EXPERT REVIEWS ON CONSUMER DEMAND FOR EXPERIENCE GOODS: A CASE STUDY OF MOVIE CRITICS -super-," Journal of Industrial Economics, Wiley Blackwell, vol. 53(1), pages 27-51, March.
    8. Michael Hutter & Christian Knebel & Gunnar Pietzner & Maren Schäfer, 2007. "Two games in town: a comparison of dealer and auction prices in contemporary visual arts markets," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 31(4), pages 247-261, December.
    9. Arnold, Michael A & Lippman, Steven A, 1998. "Posted Prices versus Bargaining in Markets with Asymmetric Information," Economic Inquiry, Western Economic Association International, vol. 36(3), pages 450-457, July.
    10. Wang, Ruqu, 1993. "Auctions versus Posted-Price Selling," American Economic Review, American Economic Association, vol. 83(4), pages 838-851, September.
    11. Hammond, Robert G., 2010. "Comparing revenue from auctions and posted prices," International Journal of Industrial Organization, Elsevier, vol. 28(1), pages 1-9, January.
    12. Cellini, Roberto & Cuccia, Tiziana, 2014. "The artist–art dealer relationship as a marketing channel," Research in Economics, Elsevier, vol. 68(1), pages 57-69.
    13. Olav Velthuis, 2007. "Introduction to Talking Prices: Symbolic Meanings of Prices on the Market for Contemporary Art," Introductory Chapters,in: Talking Prices: Symbolic Meanings of Prices on the Market for Contemporary Art Princeton University Press.
    14. Susanne Schönfeld & Andreas Reinstaller, 2007. "The effects of gallery and artist reputation on prices in the primary market for art: a note," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, pages 143-153.
    15. Victor Ginsburgh, 2003. "Awards, Success and Aesthetic Quality in the Arts," Journal of Economic Perspectives, American Economic Association, pages 99-111.
    16. Michael Rothschild & Joseph Stiglitz, 1976. "Equilibrium in Competitive Insurance Markets: An Essay on the Economics of Imperfect Information," The Quarterly Journal of Economics, Oxford University Press, vol. 90(4), pages 629-649.
    17. Orley Ashenfelter & Kathryn Graddy, 2003. "Auctions and the Price of Art," Journal of Economic Literature, American Economic Association, vol. 41(3), pages 763-787, September.
    18. Nachoem M. Wijnberg & Gerda Gemser, 2000. "Adding Value to Innovation: Impressionism and the Transformation of the Selection System in Visual Arts," Organization Science, INFORMS, vol. 11(3), pages 323-329, June.
    19. Becker, Gary S & Murphy, Kevin M, 1988. "A Theory of Rational Addiction," Journal of Political Economy, University of Chicago Press, pages 675-700.
    20. Francesco Angelini & Massimiliano Castellani, 2017. "Cultural and economic value: A (p)review," Working Paper series 17-10, Rimini Centre for Economic Analysis, revised Jan 2018.
    21. Andrei Hagiu & David B. Yoffie, 2013. "The New Patent Intermediaries: Platforms, Defensive Aggregators, and Super-Aggregators," Journal of Economic Perspectives, American Economic Association, vol. 27(1), pages 45-66, Winter.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    cultural economics; fame; talent; bargaining; information;

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • Z11 - Other Special Topics - - Cultural Economics - - - Economics of the Arts and Literature

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:rim:rimwps:17-25. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Marco Savioli). General contact details of provider: http://edirc.repec.org/data/rcfeait.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.