Impact of gallery reputation and artist reputation on art prices
Student name: Ms Garima Gulati
Guide: Prof Badal Mokhopadhyay
Year of completion: 2013
Host Organisation: TERI University
Abstract: This paper attempts to examine the pricing of art works from an institutionalist
perspective thereby supplementing the insights from economic sociology using
theoretical economic analysis. As economic value of art works cannot be measured
objectively, the concept of credibility is used to reduce the extent of information
asymmetry in the market. Taking into consideration the primary market for art, this
paper attempts to model the impact of gallery reputation and artist reputation on posted
prices using a simple model of product differentiation implementing the undercut proof
equilibrium argument. The results show that artist reputation has a positive impact on
gallery prices while gallery reputation has a negative impact on gallery prices.
However, the increase in prices due to increase in artist reputation are modest. The
increase in prices for one gallery acts as a disincentive for price sensitive art buyers
from the competing gallery to shift loyalty preventing the gallery with increased prices
to gain an undue advantage in market share thereby restricting undercutting by its
competitor.
