European Business Schools Librarian's Group

Department of Economics Working Papers,
Vienna University of Economics and Business, Department of Economics

The effects of gallery and artist reputation on prices in the primary market for art

Susanne Schönfeld and Andreas Reinstaller ()
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Susanne Schönfeld: Department of Economics, Vienna University of Economics & B.A.
Andreas Reinstaller: Department of Economics, Vienna University of Economics & B.A.

Abstract: This paper advances a decision theoretical foundation for pricing scripts by means of a simple model of product differentiation implementing the undercut-proof equilibrium concept. We argue that while sociological factors play undoubtedly an important role, economic analysis can complement the insights from economic sociology on pricing in the primary art market. Our model analyzes the effects of the gallery's and the artist's reputation on the price the gallery charges. The results suggest that prices positively correlate with an artist's reputation and negatively correlate with a gallery's reputation. The model may therefore explain the results of recent empirical studies that have led to similar results.

JEL-codes: Z11; L11 May 2005

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