An Economic Analysis of the Droit de Suite

The droit de suite, or resale royalty right, entitles an artist to a percentage of either the price received when her works are resold by their owners. This paper analyzes the effect of this law on the artist's production when early and late works are either substitutes or complements. By giving the artist an interest in the resale price of early works, the royalty provides a credible incentive to maintain value when later production decisions are made. Since the initial sales price capitalizes the stream of future values, the benefit of higher resale prices accrues to the artist.