Comments on economics, mystery fiction, drama, and art.

Sunday, January 11, 2009

A pricing puzzle

I collect art, mostly prints. I collect prints for a couple of reasons. First, I understand the process of printmaking better than I do the processes of painting or sculpture. Second, because prints come in editions (multiples), there's typically somewhat better price information available than there is for unique pieces. (I should add that the web makes collecting art all too easy, especially if you find galleries that are reliable. Unfortunately, or maybe fortunately, I have.)

I recently found a print that I like a lot, by an artist whose work in general I like a lot, and I found it at three online galleries. I've purchased from two of these galleries in the past. My experience has been that, when I find the same print in multiple galleries, the prices are usually almost the same. (In the price range in which I buy things, that means a variation of 2% to 3% between galleries.)

For this print, though, the three prices were (a) $650, (b) $975, and (c) $1200. Based on the decstiptions of the individual prints, and from additional information I requested, the price differences do not appear to be based on differences in the condition of the prints (but I think I will find out--I bought the $650 version). In some colloquy with the owner of the gallery with the $975 price, I received this explanation of the price variation: "The variation is usually determined by how much you pay for the print and how important the artist is in the art world."

Now, frankly, part of this makes no sense. Who the artist is (reputation, pricing history) clearly matters. But in this case, that's not a variable. What's left is the price that the gallery paid for the print. To an economist, however, this cannot provide an adequate explanation. Here we have three apparently identical items, with a mean offer price of about $940 and a standard deviation of about $275 (yeah, I know that the sample size is vanishingly small). And these prices are easy to find. How could either of the higher-priced galleries make a sale, at least until the lowest-priced print had been sold?

The only plausible answers I can come up with is that these gallery didn't do their homework, or that the owners galleries (b) and (c) have a much lower rate of time preference than does the owner of gallery (a).


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