XXVI Edition

14-15-16 December 2017"

Dealer Networks in the World of Art

Pownall Rachel, Maastricht University

We apply network theory to study auction outcomes in the fine art market. Using a unique historical data set, of all art auctions that took place in London between 1741 and 1913, we investigate the drivers of strategic network formation between dealers and the effect of network structure on artwork prices. Our results show that the size of the network formed as well as the extent of homophily in art specialization between dealers and sellers strongly influence link formation and prices in art auctions. Our analysis supports the conjecture that information asymmetry is the main driving force for network formation influencing the bidding behavior of market players. A larger network decreases the likelihood that a dealer will exit the auction market. Counter to expectation, the number of competitors do not have a statistically significant impact on the likelihood of exit; rather what matters most is how connected these competitors are. As a result, dealers with lower market exposure are eager to form links but are reluctant to bid aggressively

Area: Other

Keywords: Networks, Auctions, Art Dealers

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