How to Deal with Misattributions in the Art Market. Exploring Labeling Strategies and Price Setting in the Tertiary Market
Anne-Sophie Radermecker  1@  , Francesco Angelini  2, *@  , Maria Marchenko  3@  
1 : Free University of Bruxelles  (ULB)
Bruxelles -  Belgium
2 : Department of Statistical Sciences "Paolo Fortunati" - University of Bologna  (Dep. Stat - UNIBO)
Piazza Teatini, 10 - Rimini -  Italy
3 : Vienna University of Economics and Business  (WU)
Vienna -  Austria
* : Corresponding author

In this paper, we explore labeling strategies in markets trading credence goods and characterized by asymmetric information. Using the art market as a specific case study, we focus on labeling and price setting strategies behind autograph (A) and non-autograph artworks (NA). Non-autograph artworks (i.e., whose authorship is unknown) represent a significant proportion of credence goods put up for sale at auction. In this paper, we build a theoretical model to better understand the labeling and pricing strategies set by the sellers and to provide elements of a response to the following question: What are the auction houses' incentives/constraints to opt for one label over another (A/NA)? Our theoretical model takes into account a set of exogenous and endogenous forces suspected to explain the correlation between the choice of a particular labeling strategy and the final price (e.g., quality, research costs, etc.). Assuming that the price of A works is higher than that of NA works, the main outcome of our model suggests that using the most honest label and information regarding a work's actual nature might be the more profitable strategy for the seller, but only in certain conditions. The necessary condition for mislabeling an artwork are the high costs required to verify its quality, and the uncertainty on this quality that exists when the verification is not done introduce an endogenous price cap for autograph artworks. This questions the importance of reputation in this type of markets. This paper has direct implications for art market players for it relates to optimal naming treatment strategy.


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