Uncertainty, Disagreement and Expert Price Estimates in Art Markets

Abstract

The purpose of this study is to test whether the size of the pre-sale price estimate range affects art auction prices and, if so, in what direction. We find that auction house art experts' relative estimate range positively affects realized prices. The effect is robust across the mid- low- and high-end segments of the international sculpture market. Interpreting the art experts' price estimate range as a proxy for the prevailing divergence of investor opinion in the art market, the findings are consistent with disagreement models. This evidence is contradictory to the predictions of the General Auction model and does not lend support to the interpretation of the price estimate range as a proxy only for uncertainty. Moreover, the study gives insight into the price determinants of sculpture using a unique large data set of over 65,000 sculpture sales at international auctions.

Keywords: art prices, disagreement, differences of opinion, short-sales constraints, art auctions, art price determinants

JEL Classification: D44, D83, G12, P34, Z11