Prof Dakshina De Silva (Lancaster University): Dealer Networks in the World of Art
We apply network theory to study auction outcomes in the market for fine art. Using a unique historical data set, we investigate the drivers of strategic network formation between agents and the effect of network structure on artwork prices.
Our results show that the number of prior direct links formed as well as the extent of homophily between dealers and sellers strongly influence link formation and prices in art auctions. A higher number of direct links and a relatively higher specialization help dealers to purchase artworks at lower prices. Furthermore, a larger network decreases the likelihood for a dealer to exit the market. This supports the conjecture that bargaining power and reduced information asymmetries are the main influencing forces for network formation as well as the strategic bidding behavior of market players. Lastly, dealers with a lower market exposure are eager to form links but are reluctant to bid aggressively.
An Economics and Finance research seminar.