Do art specialists form unbiased pre-sale estimates? An application for Picasso paintings

Abstract

This work investigates whether art specialists provide good predictors of realized prices for Picasso paintings. A sample selection model is proposed to represent the decision of the seller and the price equation. The model is applied to data on 675 Picasso paintings for the period 1975–1994. It is found that the two auction houses, Sotheby's and Christie's, have given good predictions for the works that have been sold. However, for the unsold works, it would have been possible to give estimates better than those given by the salerooms. As a consequence they could perhaps have sold more paintings than they actually did.

Acknowledgements

We are grateful to R. Flôres and V. Ginsburgh for useful comments.

Notes

¹ In most applications (labour market) this model is used with the intention to test for sample selectivity bias, (in our case, whether it matters to include the unsold works). It is considered rather as the estimation procedure to use when having the intention to include the decision process (sold only when hammer price is higher than reservation price).

² A regression has been run regressing the pre-sale estimate on the same regressors which confirms this.

³ This is, of course, a strong simplification.

⁴ Specifically, hedonic regressions of the log of price were ran on the following variables: dimensions, techniques and media used, exhibitions, signature, Zervos publication, working periods, a dummy for resales, provenance, place of sale, time dummies and the log (of the midpoint) of the pre-sale estimate.