The FT’s John Gapper profiles Jussi Pylkkanen on the eve of Monday’s big sale at Christie’s. Deep inside the story there’s this interesting commentary on why art continues to be sold at auction. And they’re right, price discovery is a central reason for art auctions.
But this bit of academic guessing doesn’t really go far enough. More art goes to auction now than ever before because of the public nature of prices. And, whether the press wants to acknowledge it or not, the auction houses are the most “regulated” sector of the art market. On top of all of that, auctions provide something essential to the art market: confirmation. Buyers are willing to spend more money when it is confirmed there is another bidder. The “deadline” and “emotional arousal” mentioned below are secondary to the confirmation of seeing several other bidders for an artist’s work.
Having said all that, here’s Gapper:
Auctions are unusual in the 21st century — most things, even luxury items such as watches and clothes, sell at fixed prices although there is some room to haggle. Even many items on eBay, the electronic platform, are sold at fixed prices. In The Dynamics of Auction, Christian Heath, a professor of work at King’s College, London, describes them as “a somewhat anachronistic method of selling goods, more common perhaps to traditional agrarian societies than post-industrial capitalism.”
They are still used for art because every painting is different and has no intrinsic value — it does not yield anything and the cost of manufacture is usually tiny. They are also a good way to get high prices — when buyers compete against a deadline, they behave differently. The desire not only to acquire it but to beat others causes what Deepak Malhotra, a Harvard professor, terms the “emotional arousal” of auctions.