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On the allocation of talents in the contemporary art market

Author

Listed:
  • Luigi Di Gaetano

    (Autorità Garante della Concorrenza e del Mercato (Italian Competition Authority))

  • Isidoro Mazza

    (University of Catania)

  • Anna Mignosa

    (University of Catania)

Abstract

This paper investigates the selection of artists by a gallery in presence of adverse selection and moral hazard. Artists have heterogeneous creativity and are divided into two groups: those who innovated and those who did not. Artists reveal their type by participating in an auction where the employer offers a menu of contracts specifying output and wage. When the gallery has monopolistic power, price is set to give a premium to innovation. Thus, when that gallery has to choose between two low-creativity artists, it hires the artist who innovated, in a Bayesian Nash equilibrium. In contrast, a gallery with little market power facing the same alternative hires the artist who did not innovate because it cannot exploit the innovation premium. This result indicates that a segmented market with gatekeeping, in which some artists have no opportunity to bid and join a top gallery, has a negative impact on innovation. The analysis also shows that “superstar” artists (combining creativity with innovation) are more likely to end in top galleries. On the contrary, young talented (creative) artists are relatively more frequently found in galleries with little market power.

Suggested Citation

  • Luigi Di Gaetano & Isidoro Mazza & Anna Mignosa, 2019. "On the allocation of talents in the contemporary art market," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 43(1), pages 121-143, March.
    • Handle: RePEc:kap:jculte:v:43:y:2019:i:1:d:10.1007_s10824-018-9331-7
    DOI: 10.1007/s10824-018-9331-7
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    References listed on IDEAS

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    1. David Galenson, 2009. "Old masters and young geniuses: The two life cycles of human creativity," Journal of Applied Economics, Universidad del CEMA, vol. 12, pages 1-9, May.
    2. Victor Ginsburgh & Sheila Weyers, 2006. "Creation and life cycles of artists," ULB Institutional Repository 2013/5257, ULB -- Universite Libre de Bruxelles.
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    Citations

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    Cited by:

    1. Prieto-Rodriguez, Juan & Vecco, Marilena, 2021. "Reading between the lines in the art market: Lack of transparency and price heterogeneity as an indicator of multiple equilibria," Economic Modelling, Elsevier, vol. 102(C).
    2. Aloys Leo Prinz, 2022. "The concentration of power in the market for contemporary art: an empirical analysis of ArtReview’s “Power 100”," SN Business & Economics, Springer, vol. 2(1), pages 1-32, January.
    3. Angelini, Francesco & Castellani, Massimiliano, 2022. "Price and information disclosure in the private art market: A signalling game," Research in Economics, Elsevier, vol. 76(1), pages 14-20.
    4. Francesco Angelini & Massimiliano Castellani & Lorenzo Zirulia, 2022. "Overconfidence in the art market: a bargaining pricing model with asymmetric disinformation," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 39(3), pages 961-988, October.

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    More about this item

    Keywords

    Art galleries; Artist selection; Adverse selection; Moral hazard; Bayesian equilibrium;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • Z11 - Other Special Topics - - Cultural Economics - - - Economics of the Arts and Literature
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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