nps1FCB.tmp - Journal of Cultural Economics 24: 283300,...

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Unformatted text preview: Journal of Cultural Economics 24: 283300, 2000. 2000 Kluwer Academic Publishers. Printed in the Netherlands. 283 The Death-Effect in Art Prices: A Demand-Side Exploration R. B. EKELUND, JR. ? Department of Economics, Lowder Business Building #215, Auburn University, AL 36849, U.S.A. RAND W. RESSLER and JOHN KEITH WATSON University of Louisiana at Lafayette Abstract. Many factors affect the supply and demand characteristics of artists output. This explor- atory study focuses on a supply-induced demand effect the death of the artist and the assurance that, from the perspective of the durable goods monopolist, the output of the artist ends. While not purporting to be a formal test of that proposition, we observe, using U.S. auction data, a clustered rise in artists values immediately around the time of death and suggest some possible demand-side explanations using a sample of Latin American artists between 1977 and 1996. Key words: art prices, auction markets, Latin American art 1. Introduction Does an artists work substantially rise in value in connection with his or her death? Many observers, both casual and professional, believe that this is so. Is there, in short, a death effect which might be defined as a clustered rise in artists values, immediately preceding, at, or immediately after the date of death? What is a possible economic rationale for a death effect if one is shown to exist? Our analysis attempts to provide tentative answers to these questions. A multiplicity of exceedingly complex factors affects both the demand and supply for art both during an artists lifetime and after death. Individual works, changing styles, intertemporal sales and endogenous preferences are only a few of a host of factors creating problems in isolating art markets and we do not minimize the difficulties in isolating all relevant factors. Ideally, both demand and supply parameters of individual artists could be accurately specified and empiric- ally assessed in reduced form equations since any death effect is the combined result of both supply and demand. Unfortunately data does not exist with which to accurately or even approximately gauge price effects in this manner. This study, frankly exploratory in nature, focuses almost exclusively on a pos- sible demand side factor in analyzing the so-called death effect in art prices. This focus does not mean that supply effects are unimportant. The supply of an artists ? Corresponding author. 284 R. B. EKELUND, JR. ET AL. output on the current market includes a number of elements: work held by the artist, that in private collections and for sale in galleries, museum sales and, of course, the rate of output of living artists. (Current price changes in a particular artists output naturally have future supply effects). Thus, there are many intertemporal factors affecting an artists supply. The artists death is clearly one of these factors and we posit that death is also an important neglected element in the...
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This note was uploaded on 02/24/2010 for the course ECON 1313212 taught by Professor John during the Spring '09 term at The School of the Art Institute of Chicago.

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nps1FCB.tmp - Journal of Cultural Economics 24: 283300,...

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