Overconfidence in the art market: a bargaining pricing model with asymmetric disinformation

Francesco Angelini, Massimiliano Castellani () and Lorenzo Zirulia
Additional contact information
Massimiliano Castellani: University of Bologna

Economia Politica: Journal of Analytical and Institutional Economics, 2022, vol. 39, issue 3, No 9, 988 pages

Abstract: Abstract This paper develops a Nash bargaining model of price formation in the art market. Agents can be naïve, if they are overconfident and either overestimate artistic quality or underestimate their uncertainty of artistic quality, or sophisticated, if they correctly use all the available information. Overconfidence turns out to have a positive impact on both the price and the average quality of the artworks traded in the market. The impact of overconfidence on expected quality is weaker than the corresponding price increase, so sellers overcharge buyers. In addition, the buyer’s (seller’s) overconfidence has a positive (negative) impact on the likelihood of trade. If many pairs of agents may bargain simultaneously, we find that seller’s market power is negatively affected by the number of sellers and positively affected by the number of buyers. If sophisticated and naïve buyers coexist, naïve buyers exert a negative externality on the sophisticated ones, increasing the price the latter pay.

Keywords: Art market; Pricing; Overconfidence; Bargaining; Information; Belief; Art trade (search for similar items in EconPapers)
JEL-codes: C78 D4 D8 D82 Z11 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://link.springer.com/10.1007/s40888-022-00273-9 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:epolit:v:39:y:2022:i:3:d:10.1007_s40888-022-00273-9

Ordering information: This journal article can be ordered from
http://www.springer.com/economics/journal/40888

DOI: 10.1007/s40888-022-00273-9

Access Statistics for this article

Economia Politica: Journal of Analytical and Institutional Economics is currently edited by Alberto Quadrio Curzio

More articles in Economia Politica: Journal of Analytical and Institutional Economics from Springer, Fondazione Edison
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().