Presentation IGIB

8/7/2019 Presentation IGIB

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Art Markets


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Art Markets

Definition

The buying and selling of highquality oil paintings is truly aninternational activity. Buyers andsellers from all over the worldconvene at auction sales, galleries,and private homes to exchange

high quality works of art.

A result of complexinteractions than can usuallynot be explained by economictheory.


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Art Markets

Main Characteristics

Price

Works priced from $50,000and up to $1-6M.

The bulk of the works sellfrom $50,000 to $500,000.

Only a few $1-2M paintings ayear are sold.

The $3M, $4M and $5M sales

are works by artists likeRembrandt. Spectacularpaintings like these only appearon the market every few years.

P

roduct

The works are transportableoil paintings on canvas.

Sometimes, works are paintedon wood, as in old, Europeanaltarpieces.

Occasionally, very old worksmay have been done on stucco,and new works may have usedsome form of plastic.


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Art Markets


Exists only in cities with financialand cultural capital that attractsongoing concentration of marketactivity

A network of international economicactivity in major world cities: NewYork, London, Paris, Berlin, Geneva,Milan, Tokyo, Hong Kong

The U.S. leads the world market forcontemporary art with 50% of sales

New emerging art markets: China,India, Russia, and the Middle East

Although auction houses have oftendominated the headlines, dealers:52% share of global sales; art fairsare emerging as an increasinglyimportant method of selling.

Current art market is being drivenby influx of a new demographic ofyounger buyers and collectors

Far less sensitive to economic crisesand geopolitical events than otherassets long term stability

Considerably less volatile than thestock market


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A

rt Markets

Major Actors, Institutions and Nodes in the Artworld Economic

Network Artists

Dealers and Galleries

Collectors, Buyers (individual, corporate, institutional)

Auction houses

Art consultants and Advisors

Art investment services and funds

Museums and all museum professionals

Art media: press, magazines and journals, websites

Art Fairs Biennials, international art forums like Documenta

Art market services (e.g., Artnet, information aggregators, databases)



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Art Markets

Art prices develop completely or largely independently of the stock

markets or other investments such as bonds or commodities

There are many factors which determine the value of an artists work but the

main influence is the career progression of the artist

Price Index:


Art Market Analysis: Influences on Value


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Art Markets

Art Market Trends in 2008


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Art Markets



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Art Markets



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Art Markets



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Art Markets

The art market heavyweights in 2008: top 10 artists

Pablo

Picasso

Pablo

Picasso

Francis BaconFrancis Bacon

Andy WarholAndy Warhol

Damien HirstDamien Hirst

Claude MonetClaude Monet

Alberto GiacomettiAlberto Giacometti

Gerhard RichterGerhard Richter

Edgar DegasEdgar Degas

Lucio FontanaLucio Fontana

Yves KleinYves Klein


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Art Markets

Summary

Art popular marker of wealth and social status in many cultures

The most important art markets:

New York

LondonParis

Fine art is in fact a very stable investment


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ArtAuctions

ABSTRACT

I. Introduction1. Definition - Auction

2. Overview about Auctions

2.1. English auction

2.2. Dutch auction

2.3. Auction formats (Open outcry; Sealed bid auction)2.4. Types of valuation

II. How works an english auction

(Auction houses)

III. Summary


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ArtAuctions

IntroductionDefinition - Auctions

An auction is a market institution with precise rules

fof determining the price paid for an object and how

it is allocated

Auctions participants who make offers to buy

are called bidders


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ArtAuctions

Introcuction - The 4 common Auctions

English auction

First - price sealed bid auction

Dutch auction

Second - price sealed bid auction(Vickrey)


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ArtAuctions

English AUCTION

price is successively raised until only one bidder remains

Examples:

antiques, art and wine

fish in Boston

used cars in the United States

houses in Australia


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ArtAuctions

Dutch AUCTION

auctioneer calls an initial high price and then lowers

the price until one bidder accepts the current price

Examples:

cut flowers in the Netherlands

fish in Israel, Spain

tobacco in Canada


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ArtAuctions

Auction Formats Open outcry

Ascending Auctions (English)

auctioneer announces ever increasing prices

to solicit bids, continues until one person left in

Descending Auctions (Dutch)

auctioneer announces decreasing prices until

someone puts up their hand


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ArtAuctions

Auction Formats Sealed bid auctions

everyone puts bids in evelopes and gives to seller

at the same time

First price auction, Second Price auction


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ArtAuctions

First-Price Sealed Bid Auction

potential buyers submit sealed bids and the highestbidder is awarded the item for the price he bid

Examples:

Mineral rights to U.S. government-owned land Real estate

Government procurement contracts

the item is sold to the person with the highest

valuation


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ArtAuctions

Second-Price Sealed-Bid Auction

the highest bidder wins the item but pays a price equal

not to his own bid but to the second-highest bid

the price paid is related to the reservation price of the

second highest bidder

in theory it should work, in practice have had problems


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ArtAuctions

Types of valuation Private Value Auctions

each bidder knows his/ her own valuation

my valuation DOES NOT DEPEND

on your information

When is an auction likely NOT to have purely

private values?

resale possiblesome bidders are experts


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ArtAuctions

Type of valuation Common Value Auctions

All bidders have the same valuation but they

dont know what it is

My valuation DOES DEPEND on

your information

Most real-world auctions have a mixture

of private and common values


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ArtAuctions

Winner s Curse

Is it always good to win the

auction?


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aArt Markets & ArtAuctions


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ArtAuctions

5. How works an English auction - Auction houses

Rules are invented and refined over 2 centuries

by english auction houses

hammer price

reserve price = price which the seller genrally sets

= minimum acceptable bid


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ArtAuctions

5. How works an English auction - Auction houses

[] auctioneers at Chriesties are gentelmen who try to act

like businessmen, while the auctioneers at Sothebys are

businessmen who try to act like gentlemen.


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ArtAuctions

How works an English auction - Auction houses

Auctioneer

acts on behalf of the seller

receives compensations from both- seller and buyer-

for items that are sold

buyer s premium

seller s commission


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ArtAuctions


buyer s premium seller s commission

paid to the auctioneer

by the buyer by the seller

10 % of sale price % of sale price

amount is not negotiable varies with the type of item

(5- 15%)


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ArtAuctions


item unsold = buyer s premium / seller s commission

to bears some of cost of auctioning

auctioneer charge the seller a fee

on unsold items

% of the reserve price

set by the seller


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ArtAuctions

Summary

! Dont forget the winner's curse

! Auctions are a way to discover the right price

! In second-price private-value auctions, you should bid

your true valuation


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ArtAuctions

Summary

! auction design influences behavior and performance:

more bidders increases revenue

first-price auctions may increase revenue when

bidders are risk-averse.


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AArt auctions

Summar


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