Abstract
AbstractThis paper develops a Nash bargaining model of price formation in the art market. Agents can be naïve, if they are overconfident and either overestimate artistic quality or underestimate their uncertainty of artistic quality, or sophisticated, if they correctly use all the available information. Overconfidence turns out to have a positive impact on both the price and the average quality of the artworks traded in the market. The impact of overconfidence on expected quality is weaker than the corresponding price increase, so sellers overcharge buyers. In addition, the buyer’s (seller’s) overconfidence has a positive (negative) impact on the likelihood of trade. If many pairs of agents may bargain simultaneously, we find that seller’s market power is negatively affected by the number of sellers and positively affected by the number of buyers. If sophisticated and naïve buyers coexist, naïve buyers exert a negative externality on the sophisticated ones, increasing the price the latter pay.
Funder
Università degli Studi di Milano
Publisher
Springer Science and Business Media LLC
Subject
Economics and Econometrics,Sociology and Political Science,Finance
Reference93 articles.
1. Abbé-Decarroux, F. (1994). The perception of quality and the demand for services. Empirical application to the performing arts The perception of quality and the demand for services. Empirical application to the performing arts. Journal of Economic Behavior & Organization, 23, 99–107.
2. Adler, M. (1985). Stardom and talent Stardom and talent. American Economic Review, 75(1), 208–212.
3. Adler, M. (2006). Stardom and talent. In V. A. Ginsburgh & D. Throsby (Eds.), Handbook of the economics of art and culture (Vol. 1, pp. 895–906). Elsevier.
4. Akerlof, G. A. (1970). The Market for “Lemons”: Quality Uncertainty and the Market Mechanism The market for “Lemons”: Quality uncertainty and the market mechanism. The Quarterly Journal of Economics, 84(3), 488–500.
5. Amaldoss, W., & Shin, W. (2011). Competing for low-end markets. Marketing Science, 30(5), 776–788.
Cited by
1 articles.
订阅此论文施引文献
订阅此论文施引文献,注册后可以免费订阅5篇论文的施引文献,订阅后可以查看论文全部施引文献