Pre‐sale information and hammer prices for Australian Indigenous art

Abstract

Using sales data from 1987–2011 we investigate the role that pre‐sale price information plays in determining hammer prices for Australian Indigenous artworks. Importantly, we control for the degree of market concentration as this might influence buyers’ perceptions of fairness in relation to price estimates which are provided by auction houses. Auction houses therefore act as important intermediaries between art sellers and art buyers. The results suggest that pre‐sale estimates and market concentration have a differential impact on hammer prices, depending on the point in the conditional realised price distribution under examination.

Heterogeneity in Auction Price Distributions for Australian Indigenous Artists

“…Market information is significant and has the highest impact in class 3, where the hammer price is overestimated by the pre‐sale estimate . These results on the role of pre‐sale information are consistent with those of Farrell and Fry (2017) who, using quantile regression, find that the pre‐sale information on both the artwork and the market has different effects across the conditional price distribution.…”

“…Occasionally such models use quantile techniques. For example, Farrell and Fry (2017) have shown that the relationship may vary over the conditional quantiles of this single price distribution. Other approaches have included models that correct for sample selectivity (Ekelund et al .…”

“…Our specification of the regression equation for the hammer price is guided by previous work with Australian Indigenous artworks (Farrell & Fry, 2017; Farrell et al . , 2018) and relates the hammer price to pre‐sale information on the artwork itself and the prior market for Indigenous artworks as well as a control for time effects.…”

“…The acceptance of Australian Indigenous art as ‘high art’ into galleries, the primary art market (dealers) and secondary market (auctions) began in the 1940s and 1950s (Morphy, 2001; Sloggett, 2014) and accelerated in the 1970s as the dot paintings from the Papunya Tula artists began to appear in the primary market (Myers, 2002; Coleman, 2009). The secondary market began to grow rapidly from 1987 (Farrell & Fry, 2017), and in 2003 a Sotheby’s auction set a record with 70 per cent of the artworks sold in the auction bought by international bidders (Berry, 2003). Indeed, a characteristic of this secondary market is that while the auctions are almost always conducted in Australia the buyers come from around the globe.…”

“…The data for our analysis come from the Australian Art Sales Digest (Furphy, 2019), and we focus on the period 1987–2014. The auction market for Australian Indigenous artworks has grown rapidly since 1987 and was very thinly traded before then (Farrell & Fry, 2017). The Australian Art Sales Digest is a transactions‐based data set containing data for all artworks by Australian Indigenous artists offered for sale by Australian auction houses.…”