Auctions and the Price of Art

Abstract

This paper contains a review of the burgeoning new research of the last decade that has been designed to shed light on how the art auction system works, what it indicates about price formation, and how well it performs. We begin with a short description of the mechanics of the auction system and then organize the remainder of our discussion around two major topics: how auction prices can be used to determine and compare overall price movements within the art market and with other markets; and how the auction mechanism influences prices.