SKIN IN THE GAME PART 4:

#118: THE MYSTERIES OF PRICING ARTWORKS

Appraisals are opinions of value, based on definitions of value intended for specific uses. Valuations cannot guarantee that an object or artwork will actually sell at the appraised price. So how does one know what price to ask, when exposing a piece to the market? Let’s being with the law of supply and demand.

According to Britannica Money, Supply and Demand is,

“. . . the relationship between the quantity of a commodity that producers wish to sell at various prices, and the quantity that consumers wish to buy.”

As we have already seen, the demand for artworks is based on a number of factors, such as perceptions of value, trends in taste, and a critical mass of affluent buyers looking for investment-grade luxury home goods. Unlike commodities such as pork-bellies and bullion, works of art are finished goods—usually consumed as upscale lifestyle accessories. Because works of art are not quotidian necessities of everyday life, such as shelters, fuel, and foodstuffs, demand for most artworks is minuscule, when compared to barrels of crude and bushels of soybeans. While commodities prices may fluctuate in response to economic volatility, tariffs or blights, perceptions of value justify prices asked in the art market.

Let me share firsthand experience. My first professional interaction with art galleries was in new talent shows, in the summer after my graduation from Yale. Prices asked for my works were set by the galleries that handled it—first at a modest level appropriate to an emerging artist at that time.