Arts and craftiness: an economic analysis of art heists

We study the incentives that museums face in determining how much resources to invest in the protection of their artwork from theft. We present and analyze a game-theoretic model of art heists that accounts for the strategic interactions between museums’ and art thieves’ decisions and that incorporates several key features of the black market for stolen art. We find that the equilibrium level of security museums choose need not be monotonic in the true market value or the black market value of artwork, i.e., increasing the value of an art piece—whether it is the true market value or the black market value—does not necessarily lead museums to invest more in protecting their artwork. The effects of parameter changes in the model that reflect a shift of public policy depend critically on what type of policy change is considered. For instance, an increase in the penalty imposed for committing art theft cannot raise the amount of theft in equilibrium and could in fact lead museums to increase their level of security. On the other hand, investing more resources on law enforcement agencies so that they are better able to solve art crimes can actually increase the amount of theft in equilibrium by causing museums to spend less on security.     

The appropriate extent of intellectual property rights in art

The paper examines whether intellectual property rights in art should be extended to the entire world. In earlier papers, the economics of patent rights have been examined and the argument made that world welfare is likely to fall if patent rights are extended to the entire world. This argument is recapitulated here with special attention to the assumptions that are needed for its validity. These assumptions are then reexamined in the context of markets for art to see whether the argument carries over. It is found that while most of the assumptions do carry over well enough to justify the argument, there are also certain circumstances that may require greater geographic extension of intellectual property rights in some cases.Paper prepared for a conference on The Economics of Intellectual Property Rights, International Center for Art Economics, University of Venice, October 6–8, 1994.     

The drowned and the saved: the determinants of success in the Italian temporary art and cultural exhibitions market

This paper develops an empirical analysis of the determinants of the length of temporary art and cultural exhibitions. Using a sample of 659 exhibitions that took place in Italy in the period 2001–2010, a generalized linear model with a logit link and the binomial family was estimated. We also focus on the subsample of prolonged exhibitions, using a logistic accelerated failure time model. The empirical evidence supports the relevance of the subject, location and timing of the exhibition on duration; however, differences in the estimated impact of explanatory variables seem to suggest alternative marketing strategies for prolonged exhibitions.     

Institutional anomalies in the contemporary art market

This paper analyses two anomalies of the contemporary art market and the institutions created in order to allow the market to develop. The first anomaly concerns the incomplete specification of property rights in the market of successful artists. The second one originates with the lack of credibility, or time consistency, that characterises the relationships between young artists and gallery owners.     

Public choice in the tertiary art market

InMaking the Mummies Dance, Thomas Hoving, former director of the Metropolitan Museum of Art, articulates a blistering defense of his, admittedly minority, view; namely, that trading directly with dealers when selling deaccessioned works of art or adding to museum collections is preferable to buying and selling in the open auction market (Hoving, 1992). Hoving has been severely criticized for his trades during his tenure at the Metropolitan, as well as for his assessment of the market for fine arts, which runs counter to the prevailing views held by many American public officials, professional art critics and museum boards. We shall present a theoretical model in support of Hoving's argument that trades made at auctions may not serve the public interest. We shall also statistically investigate the stochastic processes which characterize the tertiary art market.     

Rivalry and externalities in secondary art markets

Summary As is the case with other field theories, Urban Economics, Environmental Economics, etc. the microeconomics of the arts attempts to derive a set of particular propositions from the general propositions of Economic Theory. In the process a substantial amount of cross-fertilization takes place. The specific characteristics of art markets require modification or amplification of some general propositions of economic theory, which in turn may offer novel and possibly useful insights as well as testable hypotheses. The following propositions appear to emanate from the present paper.In general markets R & D efforts are directed towards product or process innovation. For the most part, a known consumer technology exists. Innovation in art markets involves product creation as well as the creation of a consumer technology capable of deriving satisfaction from consumption of the new product. In open markets, a non-patentable product would entail excessive free ridership. Such a state of affairs may discourage innovation. Primary sellers would tend to adapt to narrowly changing consumer technologies. Such was the case during most of art history up to the late 19th century. At present, museums and art critics act as quasi patent offices, which fosters innovation by assuring a positive sum game.A new consumer technology is expected to be demand-augmenting. Not necessarily in the sence of McCain [12] where discontinuous jumps in demand are postulated. Even if such shifts were to occur in individual demand curves, market demand will nevertheless be continuous. The present model presumes that the augmentation is mostly due to increasing numbers of art buyers entering as the new consumer technology casues substitution of one style for another (or one fad for another). Syndicate behavior is induced by the winners of the race who have successfully established a new consumer technology and subsequently extend an umbrella over the membership. In this manner the spoils are shared more equitably. This is a peculiarly modern phenomenon. In the past one could not put a Teniers above a Rembrandt or a Polidoro above a Raphael. The generally accepted rules of decorativeness, that is, craftmanship and composition were obvious and immediately perceptible by all.In certain instances syndicate behavior favors single leadership by an established dealer, or a small group of dealers with a proven track record in spawning new technologies. Collectors, too, are involved, by overpaying for art. The discovering collector creates entry barriers for other collectors and thus has a monopoly of discovery of purely intellectual appeal art. Followers may opt to reduce their rivalry in exchange for assurances that once the new technology is in place, they will be given the opportunity to recycle the art brought into being by the leader or leaders. Under certain conditions, as analyzed in the foregoing, this constitutes an optimal strategy.As in the classical case, entry reduces investment and drives rents to zero, if each firm invests a roughly equivalent amount in support of the prevailing consumer technology. There arises the limiting case, equivalent to pure competition (see EQ. 10). On the other hand, several counterveiling strategies are possible. For example, overpayment, as in the case of Rothko. This limits the artists' output in the market. Leftover art is donated or acquired by museums. Such art is no longer competitive, as opposed to art held by other collectors, which, diminishes art'sscarcity value.The most probable outcome of a Cournot-Stackelberg type behavior is a succession of leader-follower or leader-recyler type syndicates, each successively dissolving as new consumer technologies replace old ones. It is, of course, possible for several specialized syndicates to operate contemporaneously. The rate of turnover clearly depends on the speed of dissemination of information. The curator, critic, trustee, consultant has a vested interest in episodic art and an spawning new consumer technologies: if this were not so, there would be no need for the pre-eminance of the critic. He is the magician, the priest, the medicine man who knows the secret language and penetrates the mysteries.