A place for everything and everything in its place: New York's role in the art market

Abstract

A crucial point in any sale is the choice of the market where to sell. This issue is much more important in the case of the artworks, where there is evidence that arbitrage does not necessarily equalise prices of comparable items across different cities of sale. Are these price differences due to the specific characteristics of items sold in different places or do they capture the idiosyncratic nature of the markets? In order to answer to this question, we apply the unconditional Recentered Influence Function (RIF) regression method to a sample of Picasso paintings sold worldwide during the period 2000-2019. Specifically, we compare percentile price differences between New York City, which is known for its status as a world art city and the Rest of World. Overall, results illustrate that the law of one price fails with Picasso's ‘blue chips’, his most expensive artworks. However, after the 2008-09 financial crisis the art market became more efficient and the idiosyncratic nature of New York's art market faded.