Yesterday, at Sotheby’s first online auction, a Francis Bacon triptych sold for $84.6 million. With one person online and the other on a phone, the bidding war took 10 minutes. In 2019, a triptych from the same artist sold for $142.4 million.
Called “Triptych Inspired by the Oresteia of Aeschylus” (1981), the paintings were guaranteed a $60 million minimum price by Sotheby’s:
Pricing a Painting
Thinking of an art auction, we can imagine an auctioneer looking down at a seated audience of private collectors, gallery owners, and art dealers holding paddles that might rise to signify a bid. Instead, the following rendering is what Sotheby’s expected:
The supply side of pricey contemporary art markets includes artists, private collectors, museums, and dealers. To elevate price, they hope to convey a reputation that gives bidders signals about value. The markets that determine price have been called “opaque” because a painting is a non-standard good whose value can be based on a socially created reality.
Meanwhile, on the demand side, buyers can be aware of a slew of variables that range from prior sales to prevailing taste. In addition, the “masterpiece effect” increases the price of a painting if the artist is famous as might the “death effect” after an artist dies. And, beyond the art world, the financial health of the economy can propel prices up or down.
Below, the years after 10 artists’ death are plotted with the average price of their work. You can see the connection between Andy Warhol. At 59, Mr. Warhol unexpectedly died:
Our Bottom Line: Price
In a market economy, price provides information. We know, for example, that a $10 t-shirt might not be well made. However, in art markets prices can be less dependable. We can ask what $80 million says about a Francis Bacon triptych.
My sources and more: Two NY Times articles, here and here, reminded me of a thesis on the “death effect” from a former student. Through Alanna Butera’s paper for Sotheby’s on the death effect, I learned how painting are priced. Then, this art and finance website, and this paper, were two interesting complements.