How does the art market work ? How does it operate? Who are its players? What distinguishes it from other markets?
These are some of the questions we ask when reflecting on the art economy.
To understand them is to understand the structure of the market. This is the aim of this article: How does the art market work ?
Íris, by Van Gogh. The work, produced a year before the painter’s death in 1890, was sold at a Sotheby’s auction in 1987 for $53.9 million, which in today’s terms is more than $100 million.
Text: Rute Ferreira author of the online course The Art Market.
To answer the question of how the art market works, let us first look at what “market” means.
In general terms, the market is a set of commercial operations, which are interfered by offerers (sellers) and demanders (buyers).
The word comes from the Latin mercatus, which designates a public place (open or closed) where processes of exchange of goods take place.
There are several specifications of a market.
The official market, for example, is one that develops following regulations and previously determined quotations.
The free market, in which there is no such subsequent tabulation.
The parallel market, also known as the black market, which trades in clandestine goods, etc.
The word is wide-ranging, but effectively always refers to trade, an exchange of goods. How the art market differs and how it works is what we will see next.
The Art Market
In the art market, the merchandise is the work of art.
The art market is very expressive. The values achieved in the acquisition of works of art (whether paintings, sculptures, photographs, etc.) can reach millions of dollars.
The world’s most expensive photograph, Phantom by Peter Lik,
How does the art market work – the big collectors
The same can be said of large companies, banks and financial institutions that acquire works of art as an investment and as a way of consolidating their prestige.
The world’s great museums are also potential buyers of works of art that will enhance their collections and can often attract thousands of visitors.
How does the art market work – the small collectors?
But it is important to remember that many people around the world have works of art in their homes that have also been acquired commercially, albeit for much smaller sums.
These pieces are also included in the art market, that is, anyone who thinks that this market is restricted to auctions is mistaken.
How does the art market work ?
The art market, like any market, presupposes buyers, sellers and goods.
But unlike other markets that receive daily investments and applications more easily.
The law of supply and demand works here
This means that dead artists – therefore with a limited number of works – tend to be the most expensive and desired in this trade.
However, in many other respects, the art market differs from the official market, not least in the setting of commodity values.
The final value of a work of art is not always based on its production cost and labor, but on other factors.
There are a few things to keep in mind to answer how does the art market work :
- The market is a place where financial exchanges take place. This place is usually physical but with the advent of the internet, purchases and sales can be made online, even auctions of works of art are done this way, or by telephone.
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- The art market has a structure similar to that of ordinary markets, functioning according to the laws of supply and demand, for example.
- The agents that interfere on the art market can be individuals or institutions.
And how does the art market work in auctions and in direct purchases from artists or gallerists?
We are talking about 2 types of market: primary and secondary, as we will see below.