Price and Death

38 Pages Posted: 6 Feb 2008

See all articles by Jun-ichi Itaya

Jun-ichi Itaya

Hokkaido University - Division of Modern Economics and Management

Heinrich W. Ursprung

University of Konstanz; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: February 2008

Abstract

How does an artist's death impact on the price of his or her works of art? We investigate this question in an infinite-horizon dynamic general equilibrium setting. Employing the open-loop Stackelberg equilibrium concept to describe the interactive behaviour of collectors and artists, we find that the art price remains at some well-defined "pseudo-competitive" level as long as the artist is alive. Only when the artist unexpectedly dies, the price increases on impact. This so-called death effect varies negatively with the artist's age at death. If it is well known that an artist is ailing from some terminal illness and his or her death thus does not come as a surprise, the price of the ailing artist's work increases when the news of the ailment is divulged; the price immediately jumps to the level which will prevail at the time when the artist dies.

Keywords: art prices, durable-goods monopoly, Stackelberg equilibrium

JEL Classification: D90, E31, E52

Suggested Citation

Itaya, Jun-ichi and Ursprung, Heinrich, Price and Death (February 2008). CESifo Working Paper Series No. 2213. Available at SSRN: https://ssrn.com/abstract=1090849

Jun-ichi Itaya

Hokkaido University - Division of Modern Economics and Management ( email )

Sapporo 060-0809
Japan

Heinrich Ursprung (Contact Author)

University of Konstanz ( email )

Konstanz, D-78457
Germany
+49 7531 88 3713 (Phone)

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

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