Sale Rates and Price Movements in Art Auctions

14 Pages Posted: 9 Feb 2011

See all articles by Orley Ashenfelter

Orley Ashenfelter

Princeton University - Industrial Relations Section; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

Kathryn Graddy

Brandeis University - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: February 2011

Abstract

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 that suggests that the reserve price is set on average at about 70% of the auctioneer’s low estimate as published in the auction catalog.

Keywords: art, auctions, price shocks, sale rates

JEL Classification: Z1

Suggested Citation

Ashenfelter, Orley C. and Graddy, Kathryn, Sale Rates and Price Movements in Art Auctions (February 2011). CEPR Discussion Paper No. DP8219. Available at SSRN: https://ssrn.com/abstract=1758428

Orley C. Ashenfelter (Contact Author)

Princeton University - Industrial Relations Section ( email )

Princeton, NJ 08544-2098
United States
609-258-4040 (Phone)
609-258-2907 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
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IZA Institute of Labor Economics

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Germany

Kathryn Graddy

Brandeis University - Department of Economics ( email )

415 South Street MS 021
Waltham, MA 02453-2728
United States
781-736-8616 (Phone)
781-736-2269 (Fax)

HOME PAGE: http://people.brandeis.edu/~kgraddy/

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