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Peer effects in art prices

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  • Marchenko, Maria

Abstract

Art often serves as an investment tool. However, the prices for some of the pieces are not easy to predict, and removing the price uncertainty is crucial to attracting even more investment in the art market. This paper assumes that the reputation of the artists and their social connections can play a significant role in determining the prices of their work. I check if a link to a higher valued or more famous peer has a positive effect on the prices of art pieces and on the probability of a successful sale. To test this hypothesis, I use the network of abstract artists, whose works' value is not always straightforward determined, and the prices of their works auctioned in 2000-2015 at Sotheby's, one of the most significant art and collectibles brokers in the world. The results suggest that consumers are willing to pay more for a particular artist's work, once there is a connection between the artist and a more valuable set of peers. However, the probability of sale is not affected. The auctioneer's predictions about future prices exhibit a similar trend.

Suggested Citation

  • Marchenko, Maria, 2020. "Peer effects in art prices," Department of Economics Working Paper Series 298, WU Vienna University of Economics and Business.
    • Handle: RePEc:wiw:wus005:7620
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    References listed on IDEAS

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    1. Hausman, Jerry A & Taylor, William E, 1981. "Panel Data and Unobservable Individual Effects," Econometrica, Econometric Society, vol. 49(6), pages 1377-1398, November.
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    4. Goetzmann, William N, 1993. "Accounting for Taste: Art and the Financial Markets over Three Centuries," American Economic Review, American Economic Association, vol. 83(5), pages 1370-1376, December.
    5. Noah Horowitz, 2014. "Art of the Deal: Contemporary Art in a Global Financial Market," Economics Books, Princeton University Press, edition 1, number 10361.
    6. Orley Ashenfelter & Kathryn Graddy, 2003. "Auctions and the Price of Art," Journal of Economic Literature, American Economic Association, vol. 41(3), pages 763-787, September.
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    Cited by:

    1. Maria Marchenko & Hendrik Sonnabend, 2022. "The Never Ending Book: The role of external stimuli and peer feedback in user-generated content production," Department of Economics Working Papers wuwp320, Vienna University of Economics and Business, Department of Economics.

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    More about this item

    Keywords

    peer effects; art prices; art market;
    All these keywords.

    JEL classification:

    • C49 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Other
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
    • Z11 - Other Special Topics - - Cultural Economics - - - Economics of the Arts and Literature

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