Vanderbilt Journal of Entertainment & Technology Law


Gregory Day

First Page



Based upon a series of interviews with art market experts, this Article identifies and answers a significant, yet previously unexplored economics puzzle affecting the art market. Economics suggests that markets typically produce efficiency and social wealth, but when they fail, most actors should prefer remedial measures over an inefficient status quo. The art market currently is, and has been, plagued with frauds, thefts, forgeries, and market failure--a state of affairs that the governing legal framework has made worse. Despite this, the art market seems to adamantly, and puzzlingly, defend its business culture, rejecting attempts to remedy inefficiencies. In other words, why has the art industry remained stable, yet fraught with market failure?

The research herein finds that reliable product information is the lifeblood of efficient markets, yet the nature of art encourages many participants to withhold or conceal important market information. This often prevents prospective buyers from accurately determining a work's value, leading to inefficient behavior. Few actors have sought change, however, because the economics of art produces a special conflict of interest: buyers expect art to appreciate in value and thus assume they will resell the work at a higher price, causing them to prefer a market favoring the sellers. This observation suggests that efficient markets require buyers and sellers to be sufficiently adverse or else incur stark inefficiencies.