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Empirical evidence of anchoring and loss aversion from art auctions

Author

Listed:
  • Kathryn Graddy

    (Brandeis University)

  • Lara Loewenstein

    (Federal Reserve Bank of Cleveland)

  • Jianping Mei

    (Cheung Kong Graduate School of Business)

  • Mike Moses

    (Beautiful Asset Advisors LLC)

  • Rachel A. J. Pownall

    (Maastricht University)

Abstract

We provide evidence for the behavioral biases of anchoring and loss aversion in paintings sold at auction. We find that anchoring is more important for items that are resold quickly and that the effect of loss aversion increases with the time that a painting is held. This evidence contributes significantly to the empirical evidence of the endowment effect: of increasing loss aversion with the length of holding. However, we do not find evidence that investors can take advantage of these behavioral biases.

Suggested Citation

  • Kathryn Graddy & Lara Loewenstein & Jianping Mei & Mike Moses & Rachel A. J. Pownall, 2023. "Empirical evidence of anchoring and loss aversion from art auctions," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 47(2), pages 279-301, June.
    • Handle: RePEc:kap:jculte:v:47:y:2023:i:2:d:10.1007_s10824-022-09459-2
    DOI: 10.1007/s10824-022-09459-2
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    Cited by:

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    2. Ma, Marshall Xiaoyin & Noussair, Charles N. & Renneboog, Luc, 2022. "Colors, Emotions, and the Auction Value of Paintings," European Economic Review, Elsevier, vol. 142(C).
    3. Ma, X., 2019. "Essays on alternative investments," Other publications TiSEM 7f4d5b36-96cb-4eac-ae91-f, Tilburg University, School of Economics and Management.
    4. Li, Yuexin & Ma, X. & Renneboog, Luc, 2021. "Pricing Art and the Art of Pricing : On Returns and Risk in Art Auction Markets," Other publications TiSEM 8d25ec25-78dc-4cdc-b054-f, Tilburg University, School of Economics and Management.
    5. Douglas S. Noonan & Federico Etro, 2024. "The “Bloomington Issue”," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 48(3), pages 335-337, September.
    6. Emmanuel Joel Aikins Abakah & Aviral Kumar Tiwari & Emmanuel Kwesi Arthur & Luis Alberiko Gil-Alana, 2023. "The influence of economic policy uncertainty shocks on art market," Applied Economics, Taylor & Francis Journals, vol. 55(29), pages 3404-3421, June.

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    More about this item

    Keywords

    Anchoring; Loss aversion; Endowment effect; Art auctions;
    All these keywords.

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • Z11 - Other Special Topics - - Cultural Economics - - - Economics of the Arts and Literature

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