The law of one price, noise and “irrational exuberance”: the auction market for Picasso prints

摘要

We use prices realized for Picasso prints at auctions worldwide, as well as the 100 prints that comprise his Vollard Suite, to test the law of one price: the proposition that identical art objects sold contemporaneously should command the same price regardless of the auction house or geographic region where the sale takes place. Picasso is the most prolific printmaker of the twentieth century and, from 1977 to 2004, his prints appreciated in price significantly faster than the prints of modern masters as a whole. We find that Picasso prints sold in the United States command higher prices than in Europe. However, prices realized at Sotheby’s in New York are no longer higher than at Christie’s in New York, nor at Kornfeld than at other auction houses. We find evidence of “irrational exuberance” in the transitory nature of the extraordinary prices realized for the Picasso prints included in the 1997 sale of the collection of Victor and Sally Ganz at Christie’s in New York. More generally, we find substantial noise in auction outcomes, a result well known to savvy auction goers.