How to determine the price of a work of art

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How do you put a price on a work of art?
How much should we pay for it? To answer these questions, we must analyze all the variables that influence the final price of a piece: market, price, product, author, value, supply and demand, etc.

The work of the collector is essential when forging a good art collection. There is a huge job behind each purchase: training, searching for new artists, educating the eyes, reading, traveling, listening and, above all, learning.

The art industry is very peculiar because it has two markets: the primary one which includes galleries or the online market (which gives access to the art directly from the artist) and the secondary which includes auctions or second hand (this section also includes online).

The difference is that in the primary, the galleries promote their artists and try to create a brand with their name, whereas in the secondary the artist’s curriculum and historical perspective prevail. This determines the price of a work of art.

The price of a work of art: two markets in one

Don Thompson, an Anglo-Saxon economist and professor of business sciences, researched for years how this market works to write the book: The twelve-million-dollar shark (publisher Ariel). It asks why a Manhattan billionaire banker invested 12 million dollars for the carcass of a decomposing shark from Damien Hirst, or what mysterious alchemy made painting No. 5 from Jackson Pollock sell for 140 million dollars, or how a leather jacket with a silver chain in the corner at Sothebys left the auction for the sum of 690,000 dollars.

This exhaustive analysis of Thompson’s unappealing logic shows that it is a world in which the brand stands out and that the price of a work of art, in most cases, is more in line with the economy and marketing than what has traditionally been understood as art.

So, how are these figures set? How can we know what the price we must pay for a work of art is? Here we have to distinguish between the two markets. In the primary, the price is based on the dimensions and the reputation of the artist: this means that if a gallery is hosting an artist with ten identical pieces that are in the same condition and there is no difference in price, they are substitutable.

In the secondary market, the price for each piece of art is assigned in an exclusive way: it is not the same. For example, a key work within the production of an artist or a recent piece that has an unclear trajectory will be different.

The gallery owners work directly with their artists and try to weave a promotional network through exhibitions, international fairs, relevant events, presentations and media; logically they try to give visibility to their artists. The gallery owners happen to be a kind of referee because they are betting on a criterion and a series of artists. They bet on the future, exhibit now so that in the future the author and the work will be revalued.

Here the concept of branding appears, the creation of an aesthetic brand. In the secondary market, however, the origin of the work of art is essential: it is not the same if a collection is auctioned by prestigious gallery than by someone who is unknown, as is the difference between a prestigious artist and one that is not recognized by the market. Crucially important is the conservation of the piece and the physical conditions in which it leaves when determining the price of a work of art.

Value and price of a work of art

To determine the price of a work of art there are objective elements, such as the author, the dimensions, the time, the technique or the state of conservation. And there are subjective elements, because we must not forget that we are talking about art, unique objects that will each be a part of the mental history of the collector. For this reason, the buyer will respond to an impulse and a sentimental value that the market potentially will not have.

The subjective aspects complement the objectives and by themselves could never explain the price of the art. The perception of value that people have of any product or service, be it art or anything else, depends on the individual.

This looks very good when Banksy put a stall with his works in Central Park with prices between 10 and 30 dollars and remained half unsold, being one of the most sought-after current artists in the world. What would have happened if they had been sold at auction or online?

The art market also plays a part in advertising and has a supply and demand curve: when you make it more known you make it more desirable and, therefore, the demand and the price increase.

All markets have their characteristics and art is no different from the rest. It is an exciting world that offers unparalleled experiences, which opens unknown windows to explore a new world but in which you have to know how to move so as not to make mistakes when purchasing a work of art.

But the art market can be influenced. Whoever pays 50 million for art has the ability to influence and must be taken into account. A study of ‘The Art Newspaper’, which was recently published, shows that between 2008 and 2017,  all the pieces exhibited in 30% of the main exhibitions in the museums in the United States belonged to only five galleries: Gagosian Gallery, Pace, Marian Goodman Gallery, David Zwirner and Hauser & Wirth.

Although these galleries represent the best artists (both current and historical), we must not forget that the inner circle of the art market are members of the patronages of these museums.

If you want to know more about how to acquire art read this article: ‘All you have to know to buy graphic work’.