Pricing Art Auctions

Felix Salmon has a good post up on the "idiocy" of the way certain news orgs, in this case Bloomberg, report on art auctions. His point of contention is that Bloomberg decided to post the price of a certain work of art ex-auction house fees. So while Sotheby's announced that a certain item had sold for $7.15 million, Bloomberg reported it as $6.2 million, because they decided to strip out Sotheby's commission. They actually did the math wrong -- it should have been $6.5 million -- but that's not even the real idiotic part. The idiotic part is thinking the commission doesn't matter.

The key fact is that a buyer was willing to pay $7.15 million. Imagine a fee-less art auction, would the piece then have gone for just $6.5 million? Probably not, because the buyer doesn't care how much of their bill goes to the seller and how much goes to the house.

It's similar to the situation with gas taxes. You don't quote the cost of gas ex-taxes, or for that matter, you don't quote the cost of a gallon of gas ex-the amount that the gas station receives. All those things are part of the cost of gas, and the fact that people are willing to pay $3.50 for a gallon of gas is just that. If people weren't willing to pay that much, the price would come down.

Comments

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In spite of the credit crisis, most customers who go to a fine art auction, aren't affected by the middle class press or imploding housing market, as 6,000 to 7,000 eager bidders appeared at many of the fine art auctions this year.

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Auctions can be a good place to start in your pursuit of artwork. If you’re a cruiser, almost every large ship has an “at sea” auction opportunity to buy a less expensive piece for a few hundred dollars or so. Don’t forget these are unframed prices, so be prepared to spend another hundred for that expense.

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