The paradox of being unsold: hidden signaling value of bought-in in Korean art auction

Seohyeon Hwang, Jiye Ryu () and Kihoon Hong
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Seohyeon Hwang: Hongik University
Jiye Ryu: Hongik University
Kihoon Hong: Hongik University

Journal of Cultural Economics, 2025, vol. 49, issue 3, No 10, 639-658

Abstract: Abstract This study investigates how the bought-in is related to the future returns of artworks in the Korean auction market. Employing a repeat-sales model and a dataset from Seoul Auction and K-Auction (1998–2024), the analysis indicates that artworks previously experienced bought-in tend to yield total returns approximately 14.4% lower than those without such an experience. This result suggests that the bought-in may function as a negative signal of value, possibly due to the slow diffusion of information in the art market. Furthermore, the study finds that declining prices can establish new valuation benchmarks, which, in turn, appear to shape market participants’ perceptions. These findings contribute to the literature on market efficiency and behavioral economics by providing evidence of anchoring and loss aversion in auction settings. The study also reconsiders the economic role of the reserve price, highlighting its protective function in stabilizing values within a volatile and information-sensitive market. In practical terms, the insights offered here underscore the importance of data-driven strategies for setting reserve prices and designing auctions to enhance transparency, mitigate inefficiencies, and foster long-term market sustainability.

Keywords: Reserve price; Bought-in; Artwork returns; Art market; Auction (search for similar items in EconPapers)
JEL-codes: C58 G12 G32 Z11 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s10824-025-09535-3

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