The “afternoon effect” for artworks

One resilient puzzle identified in the literature is the “declining
price anomaly.” This effect was identified by Ashenfelter (1989) and is
an obvious repudiation of the law of one price. It refers to the
observation that as an auction proceeds, the prices of the lots
decline, even for identical goods (e.g., wines). Beggs and Graddy
(1997) established the existence of the “declining price anomaly” for
heterogeneous goods using data for Contemporary and Impressionist art
auctions. This has generated great interest and a number of papers now
report somewhat conflicting results in this respect, although the
majority still seems to find evidence in favor of this anomaly (see
Ashenfelter and Graddy 2003, and Ginsburgh and van Ours 2007.) In light
of this controversy, it is of interest to investigate whether or not
Latin American art auctions are also subject to the declining price
anomaly or the so-called “afternoon effect” (“morning after effect”
would be a more appropriate name in this context as Latin Art auctions
occur in two parts, the first starting late in the day, say 7pm, and
the second starting earlier the following day, usually 10am.) In line
with previous research (Beggs and Graddy 1997), we find strong evidence
that the “declining price anomaly” holds for Latin Art data, even after
controlling for auction and artist unobserved characteristics (dummies)
and a huge array of paintings characteristics, including reputation and

Here is the link and yes I do believe this is true.  I believe it is mostly neuroeconomics at work, namely that we are more excited by new offerings than by familiar offerings.  Similarly, a painting that has been "shopped around" usually goes for a lower price than a comparable picture coming on the market for the first time in many years; admittedly it is hard to segregate out the selection bias here.  So if the same Jasper Johns print is being auctioned at 10 a.m. and 1 p.m., some people just don’t want to wait with their bids.  I wonder also if there is a theorem about how an asymmetric distribution of risk-averse bidders, fearing they might not get the work at all, could generate the same price pattern,

An alternative hypothesis — likely true in part — is that even "identical" artworks differ slightly in quality and the auction houses sell the better one first, if only to create a price precedent and excitement effect for the second one later in the day.


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