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

43 Pages Posted: 12 Oct 2006

See all articles by Alan Beggs

Alan Beggs

University of Oxford

Kathryn Graddy

Brandeis University - Department of Economics

Date Written: September 2006

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.

Keywords: Reserve prices, burning, bought-in, art, auctions

JEL Classification: D44, L82

Suggested Citation

Beggs, Alan and Graddy, Kathryn, Failure to Meet the Reserve Price: The Impact on Returns to Art (September 2006). CEPR Discussion Paper No. 5811, Available at SSRN: https://ssrn.com/abstract=936971

Alan Beggs

University of Oxford ( email )

Oxford
United Kingdom
+44 1865 277 932 (Phone)
+44 1865 277 937 (Fax)

Kathryn Graddy (Contact Author)

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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