Failure to meet the reserve price: the impact on returns to art |
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| Authors: | Alan Beggs Kathryn Graddy |
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| Institution: | (1) University of Oxford, Oxford, Oxfordshire, UK;(2) Brandeis University, Waltham, MA, USA |
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| Abstract: | This article presents an empirical study of paintings that have failed to meet their reserve price at auction. In the art
trade, it is often claimed that when an advertised item goes unsold at auction, it will sell for less in the future. We have
constructed a new dataset specifically for the purpose of testing this proposition. To preview our results, we find that paintings
which come to auction and failed return significantly less when they are eventually sold than those paintings that have not
been advertised at auction between sales. These lower returns may occur because of common value effects, idiosyncratic downward
trends in tastes, or changes in the seller’s reserve price.
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| Keywords: | JEL Classification" target="_blank">JEL Classification D44 L82 |
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