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On the allocation of talents in the contemporary art market

  • Luigi Di Gaetano
  • Isidoro Mazza
  • Anna Mignosa
Original Article
  • 69 Downloads

Abstract

This paper investigates the selection of artists by a gallery in presence of adverse selection and moral hazard. Artists have heterogeneous creativity and are divided into two groups: those who innovated and those who did not. Artists reveal their type by participating in an auction where the employer offers a menu of contracts specifying output and wage. When the gallery has monopolistic power, price is set to give a premium to innovation. Thus, when that gallery has to choose between two low-creativity artists, it hires the artist who innovated, in a Bayesian Nash equilibrium. In contrast, a gallery with little market power facing the same alternative hires the artist who did not innovate because it cannot exploit the innovation premium. This result indicates that a segmented market with gatekeeping, in which some artists have no opportunity to bid and join a top gallery, has a negative impact on innovation. The analysis also shows that “superstar” artists (combining creativity with innovation) are more likely to end in top galleries. On the contrary, young talented (creative) artists are relatively more frequently found in galleries with little market power.

Keywords

Art galleries Artist selection Adverse selection Moral hazard Bayesian equilibrium 

JEL Classification

D82 D86 Z11 C72 L14 

Notes

Compliance with ethical standards

Conflict of interest

The authors declare that they have no conflict of interest.

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Copyright information

© Springer Science+Business Media, LLC, part of Springer Nature 2018

Authors and Affiliations

  1. 1.Autorità Garante della Concorrenza e del Mercato (Italian Competition Authority)RomeItaly
  2. 2.Department of Economics and BusinessUniversity of CataniaCataniaItaly

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