University*of*Amsterdam
*
*
*
Valuation*of*Art:*Dealing*with*the*Fundamental*
Uncertainty*in*the*Contemporary*Art*Market*
*
* Justin*Kniesel*–*10871160* MSc*Business*Administration,*EMCI* August*2015* Final*Draft* * * * Supervisor:* Monika*Kackovic* !Statement!of!originality!
This*document*is*written*by*Justin*Kniesel*who*declares*to*take*full* responsibility*for*the*contents*of*this*document.** I*declare*that*the*text*and*the*work*presented*in*this*document*is*original*and* that*no*sources*other*than*those*mentioned*in*the*text*and*its*references*have* been*used*in*creating*it.** The*Faculty*of*Economics*and*Business*is*responsible*solely*for*the*supervision* of*completion*of*the*work,*not*for*the*contents.** ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! !Table!of!Contents!
Statement!of!originality!...!2
*Table!of!Contents!...!3
*Abstract!...!4
*Introduction!...!5
* Research!Question!...!7*Literature!Review!...!8
* Uncertainty!in!the!market!for!visual!art!...!8* Quality!signals!...!11* Third!party!quality!signals!...!13* The!Selection!System!...!14* Market!selection!...!17* Peer!selection!...!19* Expert!selection!...!19* Structure!of!the!contemporary!art!market!...!21* Quality!signals!emitted!by!peers!...!24* Quality!signals!emitted!by!experts!...!26* Quality!signals!emitted!by!the!market!...!29*Methodology!...!31
*Results!...!35
* Table*1*...*35* Table*2*...*36* Table*3*...*37* Table*4*...*37* Table*5*...*38* Table*6*...*39*Limitations!and!Discussion!...!41
*Conclusion!...!48
*References!...!51
* *!
!
* * * *Abstract!
* A* lack* of* information* about* product* quality* is* a* crucial* source* of* uncertainty*that*affects*decisionVmaking*in*any*marketplace.*The*contemporary* art*market*in*particular*is*subject*to*this*issue*facing*the*fundamental*problem*of* assigning* value* to* different* artworks.* This* is* because* there* are* no* objective* measures* to* determine* the* quality* of* an* artwork.* Instead,* value* judgments* depend*largely*on*undefined*criteria*that*are*difficult*to*assess.*By*drawing*on*a* sample* of* 471* residents* at* the* Rijsakademie* van* Beeldende* Kunsten* in* Amsterdam* between* 1990* and* 2013,* this* thesis* explores* the* effect* of* various* parties* on* the* financial* performance* of* artists.* Thereby,* this* dissertation* addresses* the* selection* system* theory,* which* states* that* the* composition* of* value* in* a* competitive* market* environment* depends* on* the* preferences* of* certain* selectors.* In* order* to* gain* a* thorough* understanding* of* the* selection* system*it*is*further*explored*how*the*individual*selectors*influence*each*other*by* emitting*and*interpreting*quality*signals.*The*analysis*confirms*the*assumption* that*the*selection*system*takes*a*hybrid*model*where*various*selectors*indeed* influence* each* other.* Furthermore,* it* is* shown* that* different* selectors* are* relevant* in* different* stages* of* an* artistic* career.* Finally,* evidence* supports* the* hypothesis*that*each*individual*selector*influences*the*financial*performance*of* an*artist.*
* * *
Introduction!
Valuation*of*artistic*products*tends*to*be*notoriously*challenging,*which* makes* it* cumbersome* to* understand* the* market* on* the* basis* of* traditional* economic* theories* (Beckert* &* Rössel,* 2013).* The* problem* of* valuation* is* often* motivated*by*the*distinct*characteristics*of*art*as*a*commodity.*For*example,*the* valuation*of*art*is*neither*a*mere*function*of*supply*and*demand*nor*is*it*priced* according* to* its* input* or* utility.* Instead,* the* quality* and* price* of* an* artwork* is* defined* according* to* some* aesthetic* judgments.* These* aesthetic* judgments,* however,*are*not*subject*to*quantifiable*measures*(Yogev*&*Grund,*2012).**
Wijnberg*(1997)*suggests*an*approach*to*explain*the*value*determination* in*the*visual*art*market*that*focuses*on*the*characteristics*of*those*who*ascribe* value*to*artistic*products,*instead*of*looking*at*the*material*objectives*of*art.*To* understand* what* is* valuable,* he* claims,* it* is* crucial* to* consider* those* who* are* responsible*for*the*determination*of*value*to*a*certain*product.*Respectively,*in* any* market* three* kinds* of* selectors* are* identified.* Those* selectors* define* the* value* of* a* certain* product* according* to* their* preferences.* The* three* types* of* selectors* are* consumers,* experts,* and* peers* (Wijnberg,* 1994).* The* system* in* which* these* selectors* interact* is* termed* selection* system* and* determines* the* means* to* reach* appropriability* in* a* given* marketplace.* Thereby,* value* is* ascribed*to*the*ones*who*are*selected.*Hence,*there*are*three*different*selection* systems,* namely* the* market* selection* system,* the* expert* selection* system,* and* the* peer* selection* system.* It* is* argued* that* most* markets* are* dominated* by* a* particular* selection* system.* However,* neither* selection* system* exists* in* a* pure* form.* History* shows,* that* the* market* for* visual* art* had* been* dominated* by* different* selection* system* at* different* points* in* time.* Institutional* changes* as*
well* as* changes* on* the* demand* side* caused* the* system* to* shift* from* one* dominated*by*the*market,*to*one*dominated*by*peers,*and*finally*to*one*that*is* dominated* by* experts* (Wijnberg* &* Gemser,* 2000;* Wijnberg,* 1997).* In* the* market* for* contemporary* art* it* is* acknowledged* that* experts* are* largely* responsible*for*the*value*determination*of*artworks*and*that*their*preferences* dictate*the*price*at*which*an*artwork*is*sold.*This*dissertation,*however,*argues* that*today*the*selection*system*of*the*market*for*contemporary*art*is*much*more* complex*and*not*reducible*to*only*one*that*is*dominated*by*experts.*Instead,*it*is* argued*that*several*types*of*selectors*influence*the*value*determination*process,* where*one*is*informing*the*other.*
This* assumption* stems* from* the* findings* that* value* in* the* visual* art* market*is*socially*constructed*(Currid,*2007b),*where*each*player*in*the*market* affects*one*another.*To*motivate*this*hypothesis,*this*thesis*draws*upon*signaling* theory.* It* is* argues* that* quality* signals,* which* stem* from* fellow* artists* or* art* experts*in*the*field,*substantially*influence*the*selection*process.*Quality*signals,* in*this*context,*are*found*to*be*of*vital*importance*in*market*environments*that* are*characterized*by*high*uncertainty*and*information*asymmetry*(Connelly*et* al.,*2011;*Spence,*1973a,*1973b,*1974)*Uncertainty*in*the*art*market*is*highest* when* artist* enter* the* primary* market* for* the* very* first* time* (Zorloni,* 2005).* Respectively,* it* is* assumed* that* in* early* stages* of* an* artist’s* career,* peers* emit* quality*signals*that*are*to*a*great*extent*responsible*for*the*value*ascription*to* the*work*of*a*certain*artist.*Subsequently,*experts*value*the*product*on*the*basis* of*these*signals.*In*order*to*motivate*the*assumption*this*thesis*draws*on*some* researches*that*found*a*beneficial*effect*of*artistic*movements*and*groups*on*the* artist’s*career*(Accominotti,*2009).*Moreover,*I*draw*on*the*theory*of*homophily*
to* further* explain* the* relevance* of* artistic* movements* and* its* prediction* of* quality.* Homophilious* ties,* in* this* respect,* are* responsible* for* high* ability* individuals*to*cooperate*and*influence*each*other.**
Lastly,*it*is*hypothesized*that*each*individual*selector*has*an*influence*on* the* financial* performance* of* an* artist.* Because* quality* signals* from* different* selectors*influence*the*value*perception*of*an*artwork,*financial*success*should* depend*to*a*certain*degree*on*every*selector.*Ultimately,*the*thesis*is*aimed*to* answer*the*following*research*question.*
Research!Question!
To* what* extent* is* the* competitive* outcome* in* the* market* for* visual* art* influenced*by*all*three*types*of*selectors*in*the*selection*system,*namely*peers,* experts,*and*consumers?*What*is*their*individual*effect*of*every*single*selector* on* the* economic* success* of* an* artist* and* how* do* the* individual* selectors* influence*each*other?*
!
* * * * * * * * * * *Literature!Review!
Uncertainty!in!the!market!for!visual!art!
The*availability*of*information*affects*the*decision*making*process*of*any* individual* or* organization* (Connelly* et* al.* 2011).* In* any* market* one* faces* incomplete* information,* which* potentially* hinders* market* participants* to* take* appropriate* measures* in* a* given* situation.* The* lack* of* information* causes* uncertainty*about*the*exchange*relationship*and*the*product*that*is*exchanged.* Usually*commodities*are*traded*because*the*producer*aims*to*make*a*living*and* the*consumer*is*willing*to*pay*a*certain*price*according*to*his*needs.*Both*parties* are* required* to* have* access* to* information* that* help* to* determine* the* value* of* the* product* (Plattner,* 1998).* The* difficulty* to* assess* the* value* of* a* particular* product* is* a* crucial* source* of* uncertainty* (Beckert,* 2009).* Goods* in* a* marketplace* that* are* characterized* by* this* kind* of* uncertainty* are* usually* complex,*inimitable,*nonVcomparable,*and*have*no*objective*measures*(T*Yogev,* 2010).* Valuation* of* such* commodities* poses* a* major* issue* in* economics* and* business* studies.* Valuation* is* defined* as* the* attribution* of* worth* to* a* certain* product.* Value,* moreover,* is* strongly* linked* to* quality* which* refers* to* the* product’s* ability* to* fulfill* the* consumer’s* demand.* For* instance,* the* price* of* an* artwork*reflect*the*artwork’s*quality*(Alexander*&*Bowler,*2014).*Quality,*thus,* determines*the*value*of*a*product.**
Information*about*product,*however,*quality*is*not*readily*available*in*the* art*market*(Yogev,*2010).*This*is*because*cultural*products*are*subject*to*taste* instead* of* performance* (Currid,* 2007b).* Therefore,* it* is* difficult* to* determine* quality* and* the* performance* of* an* artwork* as* an* investment* tool* is*
unpredictable.*Artistic*goods*display*very*distinct*features*and*traits*that*make*it* very*different*from*other*goods.*Partly,*the*problem*of*valuation*is*fueled*by*the* fact* that* artistic* products* do* not* really* aim* to* offer* utilitarian* value* (Hirsch,* 1972).*The*absence*of*utilitarian*value*makes*it*difficult*to*detect*standards*and* compare*them*among*various*artworks.*Moreover,*art*is*neither*judged*upon*its* production*or*labor*cost*(Peterson,*1997),*nor*does*it*have*moral*standards*that* help*to*define*its*value.*Instead,*it*has*an*expressive*or*esthetic*function*(Hirsch,* 1972).* Aesthetic* values* are* to* a* large* extent* subjective.* Furthermore,* various* artworks* are* hardly* comparable* because* of* their* uniqueness.* Pénet* and* Lee* (2014)*describe*the*paradox*in*the*art*market*as*follows:*“the*setting*of*a*price* requires* the* production* of* equivalence* between* artworks* that* yet* derive* their* value* from* being* unique.”* (Pénet* &* Lee,* 2014,* p.* 152).* Theoretically,* only* one* original* artwork* of* any* kind* exists.* Hence,* most* artworks* are* individually* produced,*aiming*for*differentiation*(GérardVVaret,*1995).*Although*this*doesn’t* mean*that*there*are*no*substitutes*for*particular*artworks,*it*certainly*imposes* difficulties*to*compare*one*work*with*another.*The*market*for*contemporary*art,* therefore,*lacks*objective*measures*and*standards*that*determine*quality*or*can* predict*whether*an*artwork*is*successful*or*not*(Wijnberg*&*Gemser,*2000).*Yet,* clear* boundaries* are* important* for* the* construction* of* worth* (Khaire,* 2014).* Consequently,* the* degree* of* uncertainty* is* very* high* in* the* art* market.* This* results*in*people*paying*tremendously*high*prices*for*objects,*whilst*they*cannot* be*certain*about*the*object’s*value.*On*the*supply*side,*artists*as*well*as*dealers* cannot* anticipate* whether* anybody* would* be* willing* to* purchase* a* certain* artwork.*A*dealer*can*never*be*sure*about*an*artist’s*success.*Therefore,*artists* spend*a*significant*amount*of*time*producing*a*product*which*may*not*be*sold*
(Plattner,* 1998).* This* problem* is* famously* described* with* the* maxim* “nobody* knows”*(Caves,*2003).**
Uncertainty*is*not*a*problem*specific*to*the*art*market.*Hence,*it*is*always* difficult*for*a*buyer*to*determine*the*exact*quality*of*a*product*because*of*lacking* information*about*objective*product*properties.*However,*uncertainty*can*often* be* mitigated* by* the* specification* of* means,* such* as* price* reductions* or* warranties,*to*resolve*potential*conflicts.*Similar*methods*are*not*feasible*for*an* artwork* since* its* value* is* not* derived* from* objective* properties* (Beckert* &* Rössel,*2013).*In*addition,*a*producer*of*creative*goods*faces*relatively*high*sunk* costs,* which* prohibits* the* artist* to* reemploy* resources* (Caves,* 2003).* Despite* these* particular* conditions,* contemporary* art* has* been* traded* in* the* marketplace* for* centuries.* It* provides* value* by* its* aesthetic* and* through* its* social* attributes,* but* also* often* serves* as* an* investment* tool* because* of* its* possibility* to* appreciate* in* price* (GérardVVaret,* 1995).* Thus,* value* has* to* be* determined*for*artworks*in*a*nonVarbitrary*way.*In*a*study*by*Grund*and*Yogev* (2012)*an*art*fair*director*claimed*that*qualitative*artworks*still*follows*certain* criteria.* Accordingly,* those* criteria* include* the* overall* composition* and* the* artist´s* ability* to* work* with* the* medium* he* or* she* is* working* with* (Yogev* &* Grund,*2012).*Nevertheless,*It*isn’t*explained*how*those*criteria*are*measured*or* how* they* could* be* evaluated* properly.* Evidence* from* the* art* markets* suggest* that*the*value*of*art*is*socially*constructed*meaning*that*value*is*established*by* social* interactions* and* in* a* specific* context* (Currid,* 2007b).* People* formulate* opinions*about*artworks*based*on*others’*assessments.*Numerous*actors*in*the* art* market* express* judgments* about* quality,* thereby* informing* each* other*
(Beckert*&*Rössel,*2013).*Thus,*actors*interpreted*and*emit*quality*signals.*
Quality!signals!
When*quality*or*the*value*of*a*product*is*not*clearly*assessable*it*is*not* possible* for* a* market* participant* to* evaluate* an* exchange* opportunity* by* focusing* solely* on* the* commodity* at* hand* (Podolny,* 1994).* The* market* participant* has* to* derive* information* from* other* sources.* Signaling* theory* is* fundamentally* concerned* with* the* reduction* of* information* gaps.* Therefore,* quality*signals*are*especially*important*in*uncertain*environments*(Connelly*et* al.*2011).*In*the*art*market,*they*help*buyers*and*sellers*to*assess*the*value*of*art* by*reducing*information*asymmetry*between*various*parties*(Beckert*&*Rössel,* 2013).*Gallery*owners*are*usually*better*informed*about*a*certain*artist*and*his* or*her*quality*than*the*average*consumer.*Quality*signals*emitted*by*the*gallery* owner,* for* example,* help* the* consumer* to* overcome* the* lack* of* information* about*the*quality*of*artworks*(Velthuis,*2003).**
A*wide*range*of*literature*has*recognized*the*signaling*theory*and*applied* to* several* selection* scenarios* (Connelly* et* al.,* 2011).* Signaling* theory* gained* prominence*because*of*its*application*to*the*labor*market*(Spence,*1973;*1974).* Spence* showed* how* employers* overcome* information* asymmetry* during* the* hiring*process*of*employees*by*interpreting*signals*that*indicate*the*capabilities* of* the* applicant.* The* employer* faces* the* need* to* rely* on* signals* because* he* cannot* be* aware* of* the* true* capabilities* of* the* job* candidate.* Hence,* the* job* candidate*undertakes*actions*to*signal*his*underlying*qualities*by,*for*example,* acquiring* a* diploma* from* a* university.* Spence* (1973)* distinguishes* between* indices*and*signals.*Whilst*indices*are*unalterable*attributes,*signals*are*defined*
as* “observable* characteristics* attached* to* the* individual* that* are* subject* to* manipulation”* (Spence,* 1973;* p.* 357).* Signaling* theory* is* generally* concerned* with*the*reduction*of*information*asymmetry*between*two*parties.*Information* asymmetry* occurs* when* various* individuals* have* not* the* same* amount* of* information* about* a* specific* matter.* It* arises* between* those* who* hold* the* information*and*those*who*require*the*information*to*make*more*sophisticated* decisions.* There* are* two* specific* types* of* information* that* are* particular* sensitive* to* asymmetry.* The* first* one* is* information* about* intent.* The* second* one,*and*perhaps*more*relevant*to*the*overall*topic*of*the*thesis,*is*information* about*quality*(Stiglitz,*2000).*Quality*is*defined*as*“the*underlying,*unobservable* ability*of*the*signaler*to*fulfill*the*needs*or*demands*of*an*outsider*observing*the* signal”* (Connelly* et* al.,* 2011,* p.* 43).* Thus,* In* this* case* of* asymmetric* quality* information*one*party*is*not*aware*of*the*other*party’s*characteristics.*Through* interpretation*of*signals,*the*involved*parties*overcome*the*issue*of*asymmetry.* Furthermore,* an* individual* in* any* situation* makes* decisions* based* on* information*that*are*publicly*available*and*information*that*are*private.*Private* information* is* costly* and* difficult* to* obtain.* Experts* in* the* art* market* have* acquired*this*kind*of*information*in*a*constant*learning*process*and*by*engaging* in*the*art*scene.*The*consumer,*on*the*other*hand,*usually*does*not*posses*the* same* information,* which* drives* him* or* her* to* attend* quality* signals.* Furthermore,* it* is* sometimes* differentiated* between* strong* and* weak* signals* (Gulati* &* Higgins,* 2003).* This* differentiation* is* made* since* some* signals* are* more* easily* detected* than* others* by* the* receiver.* The* receiver* interprets* the* signal*and*translates*it*into*meanings.*As*the*signal*is*successfully*used*to*make* a* decision,* the* receiver* is* more* likely* to* focus* on* similar* signals* in* the* future*
(Cohen*&*Dean,*2005).*The*extent*to*which*the*signal*is*correlated*with*quality*is* defined* as* signal* fit* (Connelly* et* al.,* 2011).* The* source* from* where* the* signal* stems* is* therefore* crucial.* People* will* attend* signals* from* a* specific* source* if* former*signals*proved*to*be*reliable.*Thus,*it*is*assumed*that*certain*sources*are* more* reliable* than* others.* Moreover,* the* distinction* is* made* between* signals* that*are*sent*directly*from*one*party*to*another*and*signals*that*stem*from*third* party*sources.* Third!party!quality!signals! ! In*every*marketplace*the*producer*tries*to*signal*his*hidden*qualities*to* the*consumer*to*help*him*understand*the*value*of*the*product.*In*the*market*for* contemporary*art*quality*signals*are*particularly*important*due*to*the*significant* high*degree*of*uncertainty.*Signals*emitted*by*the*producer*of*a*specific*artwork,* however,*may*be*seen*as*unreliable.*An*academic*education,*for*instance,*is*not* enough*to*prove*that*the*artist*is*capable*of*producing*highVquality*goods.*This*is* because*in*the*art*world*training*is*seen*as*an*imperfect*filtering*device*(Menger,* 1999).*Moreover,*the*relationship*between*an*artist*and*the*consumer*is*actually* not*characterized*by*information*asymmetry*since*the*producer*of*art*cannot*be* sure* about* the* quality* either.* Instead,* a* more* accurate* term* in* this* case* is* uncertainty.* Hence,* signals* from* third* parties* seem* to* be* more* reliable.* Third* party* sources* emitting* quality* signals* exist* in* various* forms.* In* a* study* about* signals* that* help* to* understand* the* quality* of* law* schools,* for* instance,* Sauder* and* Lancaster* (2006)* describe* rankings* as* a* crucial* observable* indicator.* It* is* emphasized* that* this* type* of* quality* signal* is* especially* important* in* markets* where* quality* assessment* is* problematic* and* information* is* difficult* to* gather*
(Sauder*&*Lancaster,*2006).*Other*examples*include*the*motion*picture*industry* where* awards* are* found* to* send* powerful* signals* to* the* consumer* (Gemser,* Leenders,* &* Wijnberg,* 2008).* In* the* contemporary* art* market* buyers* of* artworks* pay* attention* to* signals* that* stem* from* symbolic* forms* of* reputation* and* recognition*within* the* field* rather* than* the* material* aspect* of* the* work.* A* process*of*interaction*among*various*actors*in*the*market*builds*this*reputation* (Beckert* &* Rössel,* 2013).* Thus,* museum* curators,* critics,* dealers,* artists,* academics,*gallery*owners,*and*buyers*of*artworks*are*assumed*to*emit*signals* that*establish*the*value*of*an*artist.*The*institutions*or*actors*who*prove*to*emit* signals* that* offer* a* more* accurate* signal* fit* are* paid* more* attention* to.* Thus,* some* actors* are* assumed* to* be* more* influential* in* establishing* the* value* of* an* artwork*than*others.**
The!Selection!System!
Wjinberg*(1997)*categorizes*all*relevant*actors*in*a*given*market*into*one* out* of* three* selectors,* namely* experts,* peers,* and* the* market.* Following* the* selection* system* theory,* product* value* is* determined* according* to* the* preferences* of* the* relevant* selectors.* By* applying* signaling* theory* to* the* selection*system*it*is*aimed*to*obtain*a*comprehensive*picture*of*the*process*by* which* value* is* ascribed* to* artists.* Hence,* this* dissertation* assumes* that* every* kind* of* selector* emits* quality* signals,* which* ultimately* establishes* the* significance* of* each* product.* The* subsequent* section,* therefore,* elaborates* on* the*selection*system*theory.*
Competition* in* a* market* place* is* often* described* in* a* pure* form.* Textbooks,*thus,*frequently*assume*perfectly*informed*actors,*free*entry*and*exit*
to*markets,*no*transaction*costs*and*no*externalities.*In*this*kind*of*scenario*the* market*forces*of*demand*and*supply*are*set*according*to*the*consumers’*needs* and*completely*regulate*the*production*and*distribution*of*goods*and*services.* Hence,*the*consumer*judges*the*product*and*decides*which*producer*will*sustain* in*a*marketplace*and*which*producer*won’t.*The*decisionVmaking*is*reflected*in* the* process* of* buying* one* kind* of* product* that* suits* best* the* consumers’* preferences.* The* product* that* is* most* often* bought* by* the* consumer* is* the* winner* in* the* competitive* arena.* In* such* an* environment* competition* is* inherently*perfect.*However,*it*is*widely*known*that*this*is*barely*the*case.*Most* often* the* conditions* of* perfect* competition* do* not* hold.* In* the* market* for* contemporary*art,*for*example,*the*high*degree*of*uncertainty*doesn’t*allow*for* perfect*competition*and*yet*some*products*are*preferred*over*others.*
The* selection* system* is* developed* to* describe* and* analyze* particular* competitive*processes*within*a*certain*category.*It*recognizes*that*competition* in*the*marketplace*is*not*perfect*and*that*the*consumer,*who*is*only*one*out*of* three* types* of* selectors,* does* not* decide* about* the* competitive* outcome* alone.* Furthermore,*it*focuses*on*the*characteristics*of*the*competitors*as*well*as*the* preferences*of*the*actors*who*select*and*ultimately*determine*the*winner.*In*this* way* the* selector* shapes* the* competitive* outcome* (Wijnberg,* 2004).* The* selection*system*is*based*on*the*process*of*evolution*by*which*individuals*differ* in*their*capacity*to*sustain*in*a*certain*environment.*They*compete*for*their*right* to*exist.*Adapting*to*the*environment*is*crucial*and*those*individuals*that*learn* to* best* take* advantage* of* their* surrounding* legitimately* sustain.* Wijnberg* (1994)* applies* the* selection* process* to* economics.* Accordingly,* competition*
functions* similarly* in* a* marketplace.* The* competitor* who* adapts* best* to* the* preferences* of* its* environment* will* survive.* Hence,* being* selected* depends* on* the* ability* to* match* the* interests* of* the* one* who* selects.* In* a* scenario* where* competitive* outcomes* are* determined* by* a* selection* system,* value* is* only* ascribed* to* those* products* that* are* selected* by* the* selector.* Respectively,* valuation* profoundly* depends* on* a* certain* set* of* preferences.* Economically* speaking,*it*is*not*possible*to*determine*value*without*taking*into*account*those* to* whom* a* certain* product* appears* to* be* valuable.* If* a* product* appears* to* be* valuable* to* various* selectors,* the* system* becomes* the* sum* of* interactions* between* the* various* players* in* a* given* industry* or* market* (Wijnberg,* 1994).* Valuation,* then,* involves* interactions* among* the* various* actors* in* the* competitive*arena.*
As* mentioned* in* the* former* section,* three* different* selectors* are* identified*who*interact*with*each*other,*namely*consumers,*peers,*and*experts.* These* actors* each* form* a* particular* selection* system.* Consequently,* a* system* dominated* by* consumers* is* termed* market* selection* and* describes* the* traditional* type* where* consumers* select* a* producer* by* purchasing* its* product.* The*second*type*of*selection*is*peer*selection.*The*selectors*and*the*selected*in* this*setting*are*part*of*the*same*group.*Finally,*experts*are*selectors*shaping*the* competitive*outcome.*An*expert*selection*system*is*neither*driven*by*the*forces* of* consumers’* demand* nor* by* the* opinions* of* peers,* but* by* the* preferences* of* individuals*who*posses*specialized*knowledge*and*expertise*about*the*subject*of* interest.* In* every* industry* or* market* a* particular* selection* system* can* be* identified.* It* is* emphasized,* however,* that* neither* of* these* selection* systems*
exist*in*its*pure*form*in*a*real*world*market.*Rather,*one*often*finds*a*system*that* is* influenced* by* all* three* selectors.* Also,* selection* systems* dominated* by* only* two* of* the* ideal* types* are* found.* In* some* competitive* market* situations* the* producer*is*first*selected*by*one*kind*of*selection*system*and*then*passed*on*to* another*type.*In*many*cases,*though,*one*specific*type*of*selection*dominates*the* system*(Wijnberg*&*Gemser,*2000).*
Analyzing*a*market*by*paying*attention*to*the*particular*selection*system* in*place*has*several*advantages.*With*this*framework*the*competitive*process*of* a* particular* industry* or* market* is* disclosed,* which* aids* to* comprehend* the* development*of*the*institutional*structure.*The*selection*system*further*specifies* the* characteristics* of* the* selectors* and* selected,* and* the* means* to* attain* appropriability*(Wijnberg,*2004).*It*is*understood*how*and*according*to*whose* preferences*value*is*determined.*Thereby*it*is*possible*to*make*inferences*about* the* unit* of* analysis* which* is* in* the* case* of* this* dissertation* the* market* for* contemporary*art.*In*the*subsequent*section*a*stream*of*literature*is*presented* that* focuses* on* the* selection* system* in* the* art* market.* We* shall* see* how* the* selection*system*has*changed*over*time*from*one*dominated*by*the*consumers,* to*one*mostly*influenced*by*peers,*and*finally*one*that*is*dominated*by*experts* who*shape*the*opinion*of*the*public*and*ascribe*value*to*artworks.**
Market!selection!!
The* market* selection* system,* where* consumers* are* the* selectors,* dominated*the*market*for*contemporary*art*during*the*early*Italian*Renaissance.* People* defined* themselves* by* art* demonstrating* a* certain* social* status.* At* the* same* time,* hierarchical* structures* during* the* Renaissance* were* more* mobile*
than* ever* before* and* art* was* not* restricted* to* a* certain* audience* (Wijnberg,* 1997).* Art* was* produced* upon* request* from* religious* corporations* or* private* persons,*instructing*a*specific*workshop*controlled*by*the*guild*to*produce*the* artwork.* The* Workshop* had* the* purpose* of* delivering* different* quantities* of* artworks*while*guaranteeing*some*quality*and*stylistic*standards.*One*important* feature* of* the* workshops* was* the* apprenticeship* system,* where* artists* were* seen*as*craftsmen,*receiving*a*proper*education*according*to*the*standards*of*a* guild.* Thus,* to* be* able* to* produce* and* make* a* living* with* art,* the* artists* were* required* to* be* a* member* of* a* guild.* In* such* a* system,* the* value* of* art* was* determined* according* to* the* wants* and* needs* of* the* consumer.* The* consumer* often*perceived*art*as*a*decorative*or*elevating*object.*Therefore,*painters*would* not* judge* the* painting* according* to* their* own* personal* norms.* Rather,* they* would*decide*about*a*painting’s*value*on*the*basis*of*consumers’*perception*of* value.*
At* some* point,* joining* a* guild* was* not* attractive* to* artists* in* the* Italian* Renaissance.* Operating* under* the* control* and* dependence* of* a* master* wasn’t* satisfying* to* many* artists.* Also,* the* consumers* encouraged* the* artist* to* distinguish* themselves* from* guilds* and* other* artist* by* highly* appreciating* distinct* works* of* individual* artists.* Certification* by* a* guild* could* prove* craftsmanship*and*technical*abilities,*but*fell*short*to*detect*real*artistic*talent.* The*importance*of*the*guild*depreciated*in*its*function*to*assure*some*level*of* quality*and*consistency*and*to*regulate*the*market.*Whilst*the*importance*of*the* crafts* and* the* guilds* diminished,* an* institutional* gap* arose.* Therefore,* the* academy*was*founded*by*artists*to*fill*in*the*institutional*gap*and*to*provide*an*
alternative*regime*of*appropriability*(Wijnberg,*1997).*Eventually,*the*guild*was* replaced*by*the*academy*causing*the*system*to*shift*towards*peer*selection.*
Peer!selection!
As*illustrated*in*the*preceding*section,*peer*selection,*the*system*where* selectors*and*selected*are*part*of*the*same*group,*gained*importance*due*to*the* academy.* The* evolution* of* the* academy* during* the* Italian* Renaissance* was* enabled*by*some*changes*in*demand*and*supply*and*shifted*the*selection*system* towards* one* that* was* dominated* by* peers.* Most* functions* of* the* guild* were* taken*over*by*the*academy,*which*in*turn*was*established*according*to*the*value* perception*of*artists.*In*this*respect,*an*artist*could*expect*to*earn*a*living*with* his*work*if*he*or*she*was*approved*by*the*academy.*The*academy*provided*and* certified*education.*In*order*to*be*admitted*to*the*academy*one*was*required*to* be*supported*by*fellow*artists.*Furthermore,*the*academy*awarded*prizes*to*the* best* students,* which* served* as* an* important* signal* to* the* consumer.* The* only* function* that* was* not* adopted* by* the* academy* was* the* market* regulation.* The* reason* for* this* was* that* the* vanishing* importance* of* the* market* as* a* selector* made* this* function* superfluous.* Generally,* the* consumer* trusted* the* academy* and*other*peers*in*their*judgment*of*quality.*The*academy*formed*a*new*kind*of* institution,*which*was*just*as*important*in*defining*the*means*of*appropriability* as*the*guild*did*before*(Wijnberg,*1997).*
Expert!selection!!
In*an*expert*selection*system*value*is*attributed*to*products*following*the* preferences* and* opinions* of* individuals* that* are* neither* consumers* nor* producers,*but*posses*specialized*knowledge*in*the*field*of*interest.*Therefore,*
art*will*only*be*recognized*as*such*if*art*experts*appreciate*it.*Art*experts*include* ideological* dealers,* museums* curators,* and* art* critics.* It* is* argued* that* expert* selection*gradually*replaced*peer*selection*as*the*dominant*system*in*the*market* for* art* during* the* twentieth* century.* Experts’* ability* to* detect* talents* before* anybody* else* and* identify* new* entrants* in* the* market* gives* them* legitimacy.* Whilst* experts* gain* prestige* by* discovering* newcomers,* they* are* even* more* respected*when*they*identify*entire*art*movements*(Wijnberg*&*Gemser,*2000).* Thus,*the*rise*of*experts*as*the*central*force*in*shaping*the*opinion*of*the*public* is*explained*by*their*appreciation*of*innovation.*In*the*19th*century,*innovation*
in* contemporary* art* was* largely* limited* to* variations* of* existing* works,* styles,* and* techniques* because* the* academy* tended* to* favor* traditions.* Radical* innovations* that* did* not* conform* to* these* norms,* however,* were* mostly* neglected.* Gaining* acceptance* as* an* artist* who* sought* to* differentiate* him* or* herself* by* breaking* with* the* conventional* standards* was* problematic.* The* development*of*impressionism*as*a*legitimate*art*form*precisely*demonstrates* how*experts*could*grow*in*importance*in*contemporary*art.*Impressionism*was* a*rather*radical*form*of*innovation,*which*was*not*recognized*by*the*academy.* Some* art* connoisseurs,* however,* learned* to* appreciate* this* form* of* contemporary* art* and* exhibited* the* works.* Innovation* became* the* dominant* product* characteristic* that* prevailed* value* attribution* to* artworks.* Simultaneously,* clear* guidelines* disappeared* and* art* became* increasingly* subject* to* conflicts* about* the* quality.* Valuation,* therefore,* seems* to* be* more* problematic*in*the*contemporary*art*market.**
added* to* the* existing* selection* system* and* changed* the* characteristics* of* that* system.* Today,* it* is* said,* that* expert’s* power* increased* to* such* an* extent* that* experts* are* perceived* as* important* as* the* artist* himself* (Wijnberg* &* Gemser,* 2000).* In* this* regard,* experts* understand* the* market* forces* that* dominate* the* contemporary*art*industry,*which*gives*them*the*ability*to*determine*prices*and* quality.* They* are* well* informed* about* art* shows,* exhibitions,* prizes,* and* other* factors*that*capture*the*interest*of*knowledgeable*buyers*of*artworks.*This*kind* of* knowledge* is* not* necessarily* apparent* to* the* buyer.* The* information* asymmetry*gives*the*expert*an*advantage*in*establishing*the*value*of*an*artwork* (Plattner,*1998).*Recent*examples*of*experts’*impact*on*the*art*market*include* the* prominent* function* of* gallery* owners* and* art* dealers.* In* the* last* 50* years* they* contributed* to* the* establishment* of* New* York* as* the* center* of* the* international* art* world* (Bystryn,* 1978).* They* understood* the* importance* of* experts* and* mediated* between* museum* curators,* critics* and* artists.* Furthermore,*they*applied*marketing*techniques,*which*explicitly*addressed*art* experts.* In* this* way,* they* were* to* a* great* extent* responsible* for* the* commercialization*of*expressionist*art.*
Structure!of!the!contemporary!art!market!
Although* a* wide* range* of* literature* seemingly* suggests* that* the* art* market* is* largely* dominated* by* the* expert* selection* system,* there* are* some* reasons*to*doubt*expert*selection*as*the*sole*driver*of*value*and*prices*in*the*art* market.* This* thesis* in* particular* argues* that* the* actual* selection* process* takes* place* in* a* hybrid* model.* Thus,* it* is* assumed* that* various* selection* systems* interact*with*each*other.*In*the*following*section*we,*therefore,*elaborate*on*the*
market*structure*of*the*modern*contemporary*art*market.*
The* market* for* contemporary* art* is* the* process* by* which* artworks* are* sold*and*distributed*(Zorloni,*2005).*The*market*is*divided*into*the*primary*and* the*secondary*market.*In*the*primary*market*commercial*galleries,*art*studios,* and*art*fairs*sell*artworks*for*the*very*first*time.*Sometimes*researchers*further* distinguish* between* the* distribution* of* art* from* established* artists* and* the* distribution*of*art*from*newcomers*who*sell*their*products*for*the*first*time.*In* the*latter*setting*uncertainty*and*risk*is*highest*since*the*artist´s*work*has*not* been*proven*to*be*successful*in*terms*of*financial*performance.*At*the*same*time,* it* is* said* to* be* the* most* innovative* part* of* the* distribution* process* since* new* aesthetic* values* and* trends* are* created* (Zorloni,* 2005).* Similarly,* Peterson* (1997)* defines* the* level* of* uncertainty* according* to* the* artist’s* reputation* and* duration*of*career.*Respectively,*galleries*representing*established*artist*face*a* low* degree* of* uncertainty,* whereas* young* and* untested* artists* are* associated* with*a*high*degree*of*uncertainty.*The*unequal*distribution*of*uncertainty*is*due* to* different* promoting* activities* (Peterson,* 1997).* The* different* promoting* activities* include* entrepreneurship* and* negotiation.* Whilst* entrepreneurship* refers* to* converting* aesthetic* value* into* economic* value,* negotiation* refers* to* investing*in*art*based*on*known*prices*and*reputation.**
Emerging*artists*are*mainly*sold*in*the*primary*market.*In*the*secondary* market,*also*called*the*dealer*market,*artworks*are*further*exchanged*after*they* had*been*traded*already.*It*is*the*resale*market*for*art.*The*main*players*in*the* secondary*market*are*auction*houses*among*which*Sotheby’s*and*Christie’s*are* the* most* popular.* Furthermore,* art* dealers* are* active* players* in* that* market.*
Participants* in* this* market* tend* to* be* well* informed* about* the* traded* artist.* Therefore,*risk*and*uncertainty*is*lower*(Zorloni,*2005).*The*secondary*market* is*more*concentrated*on*the*supply*and*the*demand*side*(GérardVVaret,*1995).* Only* few* artists* succeed* in* making* the* transition* from* the* primary* to* the* secondary* market.* Besides* the* few* established* artists,* players* in* this* segment* also* compete* against* dead* artists* whose* work* is* still* demanded.* The* demand* side*mostly*consists*of*wealthy*private*or*public*collectors.*Further*distinctions* of* the* submarkets* are* sometimes* made* according* to* the* product* quality,* the* price* range,* and* the* market* dimensions* (Zorloni,* 2005).* However,* this* dissertation*considers*the*art*market*in*more*general*terms.*
Price*settings*also*differ*considerably*in*both*markets.*Thus,*the*price*in* the*primary*market*is*set*by*the*gallery*owner*or*the*artist,*but*is*often*subject* to* negotiation* (Beckert* &* Rössel,* 2013).* * Gallery* owners* follow* specific* guidelines* to* price* the* artworks* in* the* primary* market.* Respectively,* works* of* young*artists*are*usually*priced*relatively*low,*but*increase*steadily*along*with* the*duration*of*their*careers,*reputational*changes,*and*sales.*The*price*for*art*of* a*specific*artist*never*decreases*over*time*(Velthuis,*2003).*While*the*prices*vary* according*to*the*size*of*the*artworks,*gallery*owners*fail*to*differentiate*prices* according*to*quality*of*different*works*from*the*same*artist.*Hence,*prices*do*not* vary*across*artworks*of*the*same*size*(Velthuis,*2003).*The*secondary*market,*by* contrast,* shows* much* more* variations* in* prices* paid* for* artworks* of* a* specific* artist* (Hutter* et* al.* 2007).*The secondary market is found to be more price efficient due to more available information (Louargand & McDaniel, 1991). In* an* uncertain* environment,* such* as* the* primary* market* for* contemporary* art,*
valuation* is* particularly* problematic* (Khaire,* 2014).* In* order* to* overcome* the* uncertainty* about* the* product* quality,* it* is* argued* that* the* pricing* process* involves*the*interpretation*of*signals*from*various*actors*in*the*market.*
Quality!signals!emitted!by!peers!
In* the* course* of* the* modern* art* history,* many* examples* of* late* career* commercial* success* exists* which* are* explained* by* the* concept* of* “deferred* financial* success”* (Menger,* 1999).* According* to* this* logic,* artists* need* to* be* recognized*by*various*groups*before*they*are*able*to*enjoy*commercial*success* (Pénet*&*Lee,*2014).*It*is*argued*that*one*of*these*important*groups*comprises* fellow*artists*who*inform*other*parties*by*emitting*quality*signals.*Especially*in* early*stages*of*an*artist’s*career*expert*signals*may*not*be*readily*available*due* to* a* lack* of* acquaintance* with* the* artist.* It* is* found* that* only* a* very* small* proportion* of* artists* whose* work* was* previously* unknown* are* exhibited* in* a* museum* (Yogev,* 2010).* Curators* are* reluctant* to* exhibit* work* whose* quality* isn’t* defined* yet.* * At* this* stage* of* an* artist* career* fellow* artists* are* especially* important.*They*collaborate*and*review*each*other’s*artworks*(Currid,*2007a).*It* follows*that*quality*signals*by*peers*are*necessary*to*attract*attention*when*an* artist* enters* the* primary* market* for* the* first* time.* In* many* cases* parties* unknowingly*send*a*wider*range*of*signals*(Spence,*2002).*Peers,*for*example,* emit* signals* by* the* mere* membership* in* a* group.* Hence,* collaboration* or* appreciation*of*fellow*artists*is*assumed*to*send*quality*signals*to*other*parties.* To* detect* innovations* in* the* art* market,* for* example,* experts* are* assumed* to* observe* group* formations* in* order* to* realize* trends.* Respectively,* recognized* members*and*especially*leaders*of*a*group*can*expect*the*value*of*their*artworks*
to* increase* (Wijnberg* &* Gemser,* 2000).* The* underlying* reason* is* that* groups* and*movements*are*strongly*associated*with*innovation*(Accominotti,*2009).*It* is* found* that* creativity* often* occurs* in* connection* with* artistic* movements.* Movements*are*defined*as*“group*dynamics*between*artists*of*roughly*the*same* age”* (Accominotti,* 2009,* p.* 272).* It* is* concluded* that* intergenerational* movements*are*vital*in*shaping*the*career*of*artists.*Since*nowadays*innovation* is*one*of*the*most*valuable*attributes*of*an*artwork*(Wijnberg*&*Gemser,*2000),* experts*are*expected*to*derive*quality*signals*from*the*evolution*of*movements* and*its*members.*Moreover,*being*recognized*as*a*part*of*a*group*is*said*to*grant* an* evolving* producer* of* cultural* goods* legitimacy* (Kennedy,* 2008).* In* this* context,*it*is*sometimes*argued*that*the*development*of*a*shared*language*and*of* a* rhetoric* among* artists* is* important* in* order* to* gain* attention* and* being* validated* by* other* parties* because* this* signals* membership* in* a* specific* group* (Wry,*Lounsbury,*&*Glynn,*2011).**
Furthermore,* peer* appreciation* is* a* positive* signal* because* of* homophilous* ties.* The* theory* of* homophily* suggests* that* individuals* tend* to* appreciate*others*who*are*similar*to*themselves.*Contact*among*similar*people* is*more*likely*to*happen*than*among*dissimilar*people*(McPherson,*SmithVLovin,* &* Cook,* 2001).* Artists* with* similar* interests* and* mindsets* may* choose* to* collaborate* or* select* each* other.* From* this* point* of* view,* an* artist* who* is* appreciated*by*his*or*her*peers*is*likely*to*have*equal* artistic*capabilities*than* his* affiliates.* Therefore,* being* appreciated* by* an* artist* who* proved* to* produce* highVquality* artwork* signals* a* similar* quality* level* of* the* artist’s* affiliates.* Respectively,* it* is* assumed* that* peer* selection* affects* expert* selection* by*
emitting*quality*signals.*
Hypothesis!1a:*Peer*selection*in*early*stages*of*an*artist’s*career*emits*
quality*signals*that*influences*expert*selection*of*an*artist*in*a*positive*way.** As* discussed* in* previous* sections,* young* artists* often* lack* a* certain* reputation*(Peterson,*1997).*Because*of*the*lack*of*certainty,*which*is*especially* significant* in* the* market* for* young* and* emerging* artists* (Zorloni,* 2005),* commercial*galleries*are*expected*to*rely*on*quality*signals*by*peers*since*expert* quality*signals*are*rare.*Therefore,*artists*are*often*selected*by*dealers*upon*the* referrals* of* other* artists* (Velthuis,* 2003).* Because* gallery* owners* are* responsible* for* the* distribution* of* artworks*and* the* establishment* of* the* price* for* a* certain* artwork* in* the* primary* market,* it* is* further* assumed* that* peer* appreciation* emits* quality* signals* that* foster* higher* sales.* Therefore,* quality* signals* emitted* by* peers* foster* a* positive* relationship* between* peer* selection* and*financial*performance.*
Hypothesis! 1b:*Peer*selection*in*early*stages*of*an*artist’s*career*emits*
quality*signals*that*influence*an*artist’s*financial*performance*in*early*stage*of*an* artist*career.*
Quality!signals!emitted!by!experts!
Judgments* about* quality* are* based* on* a* thorough* understanding* of* the* good* rather* than* mere* familiarity* (Khaire,* 2014).* Experts* in* the* art* world* are* regarded* as* a* good* source* of* signals* because* of* their* knowledge* about* the* art* market.*By*certain*actions,*such*as*awarding,*reviewing*or*simply*representing,* experts* emit* signals* to* the* public* which* are* subsequently* interpreted* by* the*
buyers* of* art.* Museums* curators,* for* example,* decide* on* which* artwork* is* purchased*and*subsequently*exposed*to*the*public.*This*is*perceived*as*a*strong* quality*signal*because*the*artwork*that*is*exhibited*in*a*museum*enjoys*a*greater* degree* of* visibility* and* exposure* than* artwork* that* is* purchased* by,* say,* a* collector* (Currid,* 2007b).* Prices* of* artworks* in* the* primary* market,* too,* are* explained* to* serve* as* a* signaling* device* that* indicates* the* quality* of* the* artist* (Velthuis,* 2003).* It* is* suggested* that* the* peculiar* pricing* behavior* of* gallery* owners* occurs* because* prices* of* artworks* have* different* purposes* than* solely* reflecting*the*conditions*of*supply*and*demand.**
Further*quality*signals*stemming*from*experts*include*prizes,*which*are* awarded*to*artists.*For*example,*the*Turner*Prize*is*found*to*be*a*powerful*signal* influencing*the*value*of*an*artist.*It*was*first*awarded*in*1984*and*is*seen*as*the* pioneer* for* modern* art* prizes* that* followed* in* the* 1990s.* The* Tate* Gallery* in* London*started*issuing*the*prize*in*response*to*an*emerging*art*scene*and*the* decrease* in* governmental* funding* of* art.* Initially* the* Turner* Prize* served* as* a* means* to* exhibit* contemporary* art* without* purchasing* it* (Pénet* &* Lee,* 2014).* The*prize*is*awarded*to*the*artist*that*contributes*most*to*the*British*art*scene*in* the* preceding* year.* Thus,* the* jury* considered* outstanding* exhibitions* in* their* judgments* for* the* most* influential* contribution.* The* jury* consists* of* a* several* international* art* experts.* Some* research* documented* the* tremendous* effect* of* the* prize* on* the* career* of* the* awarded* artist.* Respectively,* the* winner* of* the* Turner*Prize*is*rewarded*with*a*high*degree*of*reputation*in*the*art*world*and* enjoys* a* fair* increase* in* prices* of* his* or* her* artworks.* Pénet* and* Lee* (2014),* therefore,* characterized* the* Turner* Prize* “as* an* institutional* innovation* that*
enabled* unusual* market* trajectories* with* respect* to* the* prices* garnered* by* artists* at* auction”* (Pénet* &* Lee,* 2014,* p.151).* Thus,* by* awarding* the* Turner* Prize* according* to* experts’* judgment* criteria,* strong* signals* are* sent* to* the* art* world*which*in*turn*fosters*higher*sales*in*the*secondary*art*market.*
Furthermore,* experts’* quality* signals* are* emitted* by* prestigious* gallery* shows,*museums*exhibitions,*and*media*coverage*(Yogev,*2010).*These*signals* inform*the*participants*in*the*secondary*and*primary*market.*A*museum*curator* describes* the* effect* of* museums* on* market* participants,* such* as* art* collectors.* Accordingly,*the*curator*observes*that*the*market*value*of*art*increases*when*it* is*exposed*in*his*museum.*Also,*if*an*artist*has*already*exhibited*his*work*in*a* renown* museum,* the* gallery* who* represents* this* artist* will* interpret* this* as* a* signal*of*quality*affecting*its*behavior*in*dealing*with*the*specific*artist*(Yogev,* 2010).*Thus,*a*museum*that*purchases*art,*signals*the*underlying*quality*of*this* specific* artwork.* By* doing* so,* experts’* signals* help* to* manage* and* to* reduce* uncertainty*in*the*marketplace.*Once*experts’*quality*signals*are*available,*they* might* be* more* salient* than* peer* signals* because* of* their* great* exposure.* Therefore,* it* is* assumed* that* signals* stemming* from* experts* are* particularly* important*in*later*stages*of*an*artist’s*career*when*those*signals*are*more*readily* available.*These*findings*are*reflected*in*the*following*hypothesis.*
Hypothesis! 2a:*Expert*selection*emits*quality*signals*that*influence*the*
market*selection*in*later*stages*of*an*artist’s*career.*
Hypothesis! 2b:* Expert* selection* emits* quality* signals* that* strongly*
Quality!signals!emitted!by!the!market!
The* social* context,* in* which* art* is* placed,* as* well* as* interactions* among* various* market* participants* are* found* to* further* influence* the* value* of* an* artwork*(Currid,*2007b).*It*follows*that*market*selection,*besides*peer*selection* and*expert*selection,*also*plays*a*role*in*the*process*by*which*value*is*ascribed*to* contemporary*artworks.*This*is*motivated*by*the*habit*of*consumers*to*rely*on* one* another* when* evaluating* tasteVdriven* products* (Currid,* 2007b).* Some* researchers* suggest* that* aesthetic* value,* besides* being* taste* driven,* is* further* influenced*by*the*market.*The*economic*value*of*art,*hence,*impacts*its*aesthetic* value.* Whilst* the* subjectivity* of* taste* dictates* aesthetic* values,* taste* is* also* learned*in*a*process*of*social*interactions*among*consumers.*This*social*context* creates*wordVofVmouth,*which*is*important*for*the*ultimate*success*of*a*cultural* goods*(Currid,*2007b).*Art,*for*instance,*is*evaluated*in*a*social*context*at*formal* events,*such*as*gallery*openings*and*art*fairs,*but*also*in*a*more*informal*way*of* social*interactions*among*various*actors.*Besides*cultural*producers*and*experts,* consumers* also* participate* as* evaluators.* Some* consumers,* respectively,* act* as* unofficial*experts*investing*a*significant*amount*of*time*attending*art*venues*and* events.* This* group* of* people* is* termed* “hobbyists”* (Currid,* 2007b).* Similar* to* experts,*they*possess*specialized*knowledge*in*the*cultural*field.*Their*presence* at*cultural*events,*which*they*report*and*share*at*online*forums*and*blogs,*is*a* crucial* quality* signal* adding* to* the* value* of* cultural* goods.* Similarly,* cultural* producer*of*other*creative*goods,*like*music*or*clothes,*act*as*consumers*in*the* market* for* contemporary* art.* This* type* of* consumer* is* generally* assumed* to* have* a* good* taste* and* therefore* other* people* trust* their* judgment* (Currid,* 2007b).*Quality*signals*emitted*by*this*group*of*consumers,*hence,*are*expected*
to*influence*an*artwork’s*economic*value.**
Furthermore,* demand* of* a* specific* product* is* subject* to* consumers* influencing* other* consumers.* Respectively,* a* broader* population* of* consumers* informs* the* value* of* a* specific* fashion* (Blumer,* 1969).* In* a* study* about* music* charts,* for* instance,* evidence* is* found* that* consumers’* listening* and* download* behavior*is*influenced*by*the*mere*popularity*of*songs*(Salganik*&*Watts,*2008).* In* this* regard,* consumers* are* found* to* base* their* listening* decision* on* the* favorite*songs*of*other*consumers.*Perceived*value*appears*to*be*dependent*on* other* people’s* judgment.* The* popularity* of* a* given* product* is* then* a* quality* signal* that* positively* influences* market* performance* (Hedström* &* Swedberg,* 1998).* In* the* contemporary* art* market,* however,* this* effect* is* supposed* to* be* more*pronounced*in*the*secondary*market*or*at*later*stages*of*an*artist’s*career* because* of* the* price* anomalies* that* are* present* in* the* primary* market.* Moreover,* the* primary* market* is* also* sometimes* seen* as* a* mechanism* that* signals*the*artist’s*quality*to*the*secondary*market*(GérardVVaret,*1995).*These* findings*result*in*the*final*hypothesis.*
Hypothesis! 3:* Market* selection* emits* quality* signals* that* influences*
financial*performance*in*the*secondary*market.*
* * * *
Methodology!
In* this* dissertation* it* is* hypothesized* that* the* selection* system* takes* a* hybrid* model* in* the* market* of* contemporary* art,* where* various* selectors* influence*each*other*by*emitting*quality*signals.*In*particular,*it*is*assumed*that* peer* selection* precedes* expert* selection.* Expert* selection,* in* turn,* precedes* market* selection.* Finally,* all* selectors* individually* influence* the* financial* performance*of*an*artist*in*different*stages*of*its*career.*To*test*these*hypotheses* data*are*used*that*reflect*quality*signals*from*the*market,*from*peers,*and*from* experts.*Thus,*I*make*use*of*a*dataset*that*was*gathered*by*the*Rijsakademie*van* Beeldende*Kunsten*in*Amsterdam.*The*sample*includes*residents*of*the*academy* between*1990*and*2013.*It*consists*of*471*Dutch*as*well*as*international*young* to*middle*aged*artists.*Therefore,*the*sample*represents*a*wide*range*of*people* that*have*completed*an*art*education*or*gained*experience*as*an*artist.*
The* selected* sample* is* representative* for* the* population* since* it* is* composed* of* artist* who* long* for* professional* careers* and* recognition.* The* dataset*consists*of*secondary*data*that*where*collected*in*cooperation*with*the* Rijksakademie* during* a* survey* dealing* with* peer* appreciation* which* is* closely* related*to*the*study*of*this*dissertation.*
The* original* survey* was* conducted* with* 27* participants* who* had* to* answer*a*series* of*questions*about*each*of*the*471*artists.*At*the*time*of*their* participation*the*27*respondents*were*residents*at*the*Rijksakademie,*as*well.*At* first,*the*participants*were*asked*whether*they*recognize*various*names*from*a* list*of*artists.*Subsequently,*the*list*has*been*shortened*by*the*amount*of*people* who*have*not*been*recognized*by*a*single*participant.*Second,*the*participants* are*asked*about*the*remaining*artists:**
(1)*if*they*respect*a*certain*artist’s*work,* (2)*if*the*work*of*these*artists*have*influenced*their*work,* (3)*if*they*would*like*to*have*an*exhibition*together*with*these*artists,* (4)*if*the*work*of*a*certain*artist*is*substantially*different*from*the*work* of*his/her*contemporaries,* (5)*if*a*certain*artist*is*commercially*successful,* (6)*if*the*artist*is*acknowledged*by*his*peers,*and* (7)*if*the*artist*in*question*is*acknowledged*by*art*experts*for*his*or*her* work.** These*questions*are*answered*on*a*scale*of*1*to*5.*Subsequently,*the*score* was*averaged*for*each*single*artist*resulting*in*interval*data.*
In* order* to* measure* early* quality* signals* from* peers,* further* data* are* derived*from*interview*notes*that*have*been*taken*during*the*admission*process* of*the*artists*at*the*Rijsakademie*van*Beeldende*Kunsten.*These*data*are*coded* “1”*for*negative*assessment*and*“2”*for*positive*assessment.*The*category*“0”*is* given*for*neither*positive*nor*negative*assessment*or*for*missing*values.*
Besides* the* data* gathered* in* the* survey* and* the* admission* interviews,* data* on* sale* figures* as* well* as* signaling* data* are* additionally* collected.* The* Rijksakademie*provides*these*data,*as*well.*They*describe*sales*to*corporate*art* collections,* private* collections,* and* institutions* like* museums* and* auction* houses.* Respectively,* the* dataset* describes* sales* in* the* primary* and* secondary* market.*The*signaling*data*represent*the*number*of*reviews,*awards,*and*gallery* affiliation.* Whilst* the* number* of* reviews* and* awards* are* meant* to* represent* experts’*quality*signals,*gallery*affiliation*is*regarded*as*quality*signals*that*stem* from* the* market.* This* is* because,* besides* advocating* the* artistic* value* of* the*
artists,*commercial*galleries*are*responsible*to*establish*the*commercial*value*of* their* artists* (Peterson,* 1997).* Galleries* are* expected* to* represent* what* is* demanded* because* of* their* desire* to* make* a* living* and* being* commercially* successful.*Galleries,*therefore,*should*be*interested*in*satisfying*the*market*in* order*to*make*a*profit*on*their*artists.**
Additionally,* these* data* are* documented* at* different* points* in* time* in* order* to* differentiate* between* the* early* and* later* career* of* artists.* Thus,* early* career*is*defined*as*the*career*from*the*start*of*the*artistic*education*to*one*year* before* graduation.* Later* career,* by* contrast,* is* defined* as* one* year* after* the* graduation* from* the* artistic* education.* This* approach* enables* to* measure* the* relative*importance*of*quality*signals*from*each*selector*at*a*given*point*in*time.*
*
To*test*the*hypotheses,*the*effect*of*being*recognized*by*current*members* of*the*Rijksakademie*on*the*dependent*variables*Early/Late*Awards,*Early/Late*
reviews,*Early/Late*Market*Appreciation,*Early/Late*Financial*Performance*in*the* Primary*Market,* and* Early/Late*Financial*Performance*in*the*Secondary*Market*
are* tested.* Because* the* data* are* not* normally* distributed,* the* dependent* variables*are*categorized*resulting*in*binary*outcome*variables.*The*categories* given* to* each* dependent* variable* is* either* “successful”* in* terms* of* financial* performance,*expert’s*appreciation,*and*market*appreciation*or*“not*successful”* and*are*coded*“1”*and*“0”,*respectively.*For*example,*Artists*who*never*received* an*award*are*seen*as*not*successful*in*terms*of*expert*selection*and*are*coded* “0”.* Thus,* the* method* chosen* to* test* the* hypotheses* is* a* logistic* regression* analysis.**
In*the*subsequent*part*of*the*analysis*all*artists*that*are*not*recognized*by* peers,* are* removed* from* the* sample.* This* is* because* the* independent* variable*
Late*Peer*Signals*is*reflected*in*the*questions*about*peer*appreciation.*The*artists*
who*are*not*recognized*by*a*single*peer*logically*scored*on*average*a*0*on*this* variable.*An*average*score*of*0,*however,*is*not*a*meaningful*value*when*scores* are*given*on*a*scale*from*1*to*5.*The*Crombach’s*Alpha*is*calculated*to*test*the* internal*validity*of*the*construct*called*Late*Peer*Signals.*Subsequently,*the*mean* of* the* interval* data* is* computed* to* combine* the* seven* elements* into* a* single* variable.* Finally,* the* averaged* variable* is* used* to* perform* a* logistic* regression* analysis* on* the* binary* dependent* variables* Early/Late* Awards,* Early/Late*
reviews,*Early/Late*Market*Appreciation,*Early/Late*Financial*Performance*in*the* Primary*Market,*and*Early/Late*Financial*Performance*in*the*Secondary*Market*
To* test* Hypothesis2a* and* Hypothesis2b,* a* sensitivity* analysis* is* performed.*Thereby,*the*total*count*of*expert’s*signals,*e.g.*reviews*and*awards,* are* tested* in* a* logistic* regression,* as* well.* Thus,* their* effect* is* tested* on* the* binary* variables* Early/Late* market* appreciation,* Early/Late* Financial*
Performance*in*the*Primary*Market,*and*Early/Late*Financial*Performance*in*the* Secondary*Market.* Finally,*Hypothesis*3*is*tested*by*estimating*the*effect*of*the*total*count*of* gallery*affiliation*on*Early/Late*Financial*Performance*in*the*Primary*Market,*and* Early/Late*Financial*Performance*in*the*Secondary*Market.* *
Results!
Table!1!
Peer$Recognition$(IV)$
DV$ B$ S.E.$ Sig.$ Exp(B)$ Overall$Percentage$Correct$
Early$Awards$ .069$ .025$ .006$ 1.071$ 55.5$ Early$Reviews$ .150$ .038$ .000$ 1.162$ 66.2$ Early$Market$Appreciation$ .051$ .032$ .105$ 1.053$ 90.0$ Early$Financial$Performance$in$Prim.$ Market$ .045$ .025$ .078$ 1.046$ 78.9$ Early$Financial$Performance$in$Sec.$ Market$ .009$ .051$ .858$ 1.009$ 95.1$ Late$Awards$ .093$ .024$ .000$ 1.098$ 76.2$ Late$Reviews$ .068$ .026$ .008$ 1.070$ 54.5$ Late$Market$Appreciation$ .089$ .024$ .000$ 1.094$ 77.2$ Late$Financial$Performance$in$the$ Prim.$Market$ .072$ .025$ .004$ 1.074$ 78.7$ Late$Financial$Performance$in$the$ Sec.$Market$ .106$ .025$ .000$ 1.112$ 75.1$ *
The* first* table* depicts* the* effect* of* being* recognized* by* peers* on* the* dependent* binary* variables* Early/Late* Awards,* Early/Late* reviews,* Early/Late% Market%Appreciation,* Early/Late%Financial%Performance%in%the%Primary%Market,* and*
Early/Late%Financial%Performance%in%the%Secondary%Market.* It* is* shown* that* when*
artists*are*recognized*by*other*artists,*which*is*one*form*of*quality*signal*emitted* by*peers,*the*likelihood*of*being*appreciated*by*the*market*in*later*career*stages* increases.* Respectively,* the* positive* coefficient* B=* .089* is* significant* at* a* .000* significance* level.* Furthermore,* artists* who* are* recognized* by* peers* are* more* likely* to* be* awarded* in* later* stages* of* their* career* (B=* .093)* at* a* significance* level* of* .000.* The* relationships* between* Peer* Recognition* and* Later* Financial*
Performance*in*the*Primary/Secondary*Market*are*similarly*significant*(p<*.01).**
Being* recognized* by* peers* seems,* however,* not* to* be* a* very* good* predictor* of*
secondary* market.* Hence,* the* relationship* between* Peer*Recognition* and* Early*
Awards*is*significant*at*a*.01*significance*level,*but*the*model*has*a*rather*poor*
predictive* value* of* 55.5%.* Expert’s* reviews* in* early* stage* of* an* artist’s* career* seems* to* be* more* likely* when* the* artist* is* recognized* by* peers.* Thus,* the* significance*level*is*at*.000.*
Table!2!
Early$Reviews$(DV)$
IV$ B$ S.E.$ Sig.$ Exp(B)$
Early$Peer$Signals$ .877$ .319$ .006$ 2.405$
Early$Market$Signals$ R.093$ .344$ .786$ .911$
Overall$Percentage$Correct$ $$ 75.3%$
Early$Awards$(DV)$
IV$ B$ S.E.$ Sig.$ Exp(B)$
Early$Peer$Signals$ .187$ .182$ .304$ 1.205$
Early$Market$Signals$ .331$ .319$ .299$ 1.393$
Overall$Percentage$Correct$ $$ 53.3%$
*
Table*2*depicts*the*relationship*between*early*quality*signals*emitted*by* peers,* early* quality* signals* emitted* by* the* market* and* the* dependent* variable*
Expert* Selection* in* form* of* reviews* and* awards.* None* of* the* relationships* are*
significant* except* for* the* relationship* between* Early* Peer* Signals* and* Early*
Reviews* with* a* significance* level* p<.01* (p=* .006)* and* a* tremendously* high*
exponent*of*the*coefficient*B*at*2.405.*The*positive*relationship*means*that*the* likelihood*of*being*reviewed*in*early*career*stages*increases*if*peers*emit*quality* signals*about*a*certain*artist.*Therefore,*Hypothesis*1a*is*partly*confirmed.* * * * *
Table!3!
Late$Reviews$(DV)$
IV$ B$ S.E.$ Sig.$ Exp(B)$
Early$Peer$Signals$ .025$ .188$ .893$ 1.026$ Late$Peer$Signals$ R.258$ .238$ .278$ .772$ Early$Market$Signals$ .165$ .322$ .609$ 1.179$ Late$Market$Signals$ .077$ .088$ .381$ 1.080$ Overall$Percentage$Correct$ $$ 61.2%$ Late$Awards$(DV)$
IV$ B$ S.E.$ Sig.$ Exp(B)$
Early$Peer$Signals$ .103$ .194$ .596$ 1.108$ Late$Peer$Signals$ R.664$ .258$ .010$ .515$ Early$Market$Signals$ R.652$ .442$ .140$ .521$ Late$Market$Signals$ .187$ .100$ .061$ 1.205$ Overall$Percentage$Correct$ $$ 61.2%$ *
Table* 3* shows* the* relationship* between* the* independent* variables* describing* peer* quality* signals* and* market* quality* signals* and* the* dependent* variables*describing*later*expert*selection.*It*is*noticed*that*there*is*a*negative* significant*relationship*between*Later*Peer*Signals*and*Late*Awards*at*p=*.01*and* a*coefficient*of*B=*V.664.*The*negative*relationship*should*actually*be*interpreted* as* a* positive* relationship* since* the* scale* of* the* variable* Later* Peer* Signals* is* reversed*(1=*strongly*agree,*5=*strongly*disagree).**
Table!4!
Early$Market$Appreciation$(DV)$
IV$ B$ S.E.$ Sig.$ Exp(B)$
Early$Expert$Signals$(Reviews)$ .012$ .040$ .760$ 1.012$
Early$Expert$Signals$(Awards)$ R.028$ .140$ .844$ .973$
Overall$Percentage$Correct$ $$ 88.5%$
Late$Market$Appreciation$(DV)$
IV$ B$ S.E.$ Sig.$ Exp(B)$
Early$Expert$Signals$(Reviews)$ R.017$ .035$ .637$ .984$
Late$Expert$Signals$(Reviews)$ .094$ .026$ .000$ 1.098$
Early$Expert$Signals$(Awards)$ R.175$ .111$ .115$ .840$
Late$Expert$Signals$(Awards)$ .383$ .200$ .056$ 1.467$
The*next*table*(Table*4)*describes*the*relationship*between*expert*quality* signals*and*market*selection.*A*significant*positive*relationship*is*found*between*
Late* Expert* Signals$in* the* form* of* reviews* and* Later* Market* Appreciation.* The* significance*level*is*p<*.001*(p=*.000)*and*the*coefficient*is*positive*at*B=*.094.* Furthermore,*a*marginally*significant*relationship*is*found*between*Later*Expert*
Signals*in*the*form*of*awards*and*Later*Market*Appreciation*with*p=*.056*and*B=*
.383.* Early* expert* signals,* by* contrast,* do* not* seem* to* substantially* influence* market*selection.*
Table!5!
Early$Financial$Performance$in$the$Primary$Market$(DV)$
IV$ B$ S.E.$ Sig.$ Exp(B)$
Early$Peer$Signals$ R.277$ .223$ .215$ .758$ Early$Expert$Signals$(Awards)$ .048$ .084$ .569$ 1.049$ Early$Expert$Signals$(Reviews)$ .042$ .028$ .138$ 1.042$ Early$Market$Signals$ .253$ .323$ .434$ 1.287$ Overall$Percentage$Correct$ $$ 73.6%$ Early$Financial$Performance$in$the$Secondary$Market$(DV)$
IV$ B$ S.E.$ Sig.$ Exp(B)$
Early$Peer$Signals$ R1.101$ .825$ .182$ .332$ Early$Expert$Signals$(Awards)$ .036$ .158$ .818$ 1.037$ Early$Expert$Signals$(Reviews)$ .019$ .048$ .694$ 1.019$ Early$Market$Signals$ .609$ .463$ .188$ 1.839$ Overall$Percentage$Correct$ $$ 94.3%$ * In*Table*5*the*effects*of*quality*signals*emitted*by*peers,*experts,*and*the* market*on*early*financial*performance*in*the*primary*and*secondary*market*are* exhibited.*No*significant*relationship*is*found.* * *
Table!6!
Late$Financial$Performance$in$the$Primary$Market$(DV)$
IV$ B$ S.E.$ Sig.$ Exp(B)$
Early$Peer$Signals$ R.236$ .257$ .358$ .790$ Late$Peer$Signals$ .584$ .339$ .085$ 1.793$ Early$Expert$Signals$(Awards)$ R.049$ .112$ .664$ .952$ Late$Expert$Signals$(Awards)$ .145$ .207$ .484$ 1.156$ Early$Expert$Signals$(Reviews)$ .039$ .032$ .227$ 1.040$ Late$Expert$Signals$(Reviews)$ .065$ .024$ .006$ 1.067$ Early$Market$Signals$ .773$ .185$ .000$ 2.167$ Late$Market$Signals$ .105$ .368$ .776$ 1.111$ Overall$Percentage$Correct$ $$ 81.1%$ Later$Financial$Performance$in$the$Secondary$Market$(DV)$
IV$ B$ S.E.$ Sig.$ Exp(B)$
Early$Peer$Signals$ .017$ .241$ .945$ 1.017$ Late$Peer$Signals$ R.920$ .305$ .003$ .399$ Early$Expert$Signals$(Awards)$ R.031$ .114$ .788$ .970$ Late$Expert$Signals$(Awards)$ .679$ .236$ .004$ 1.972$ Early$Expert$Signals$(Reviews)$ R.062$ .045$ .168$ .940$ Late$Expert$Signals$(Reviews)$ .160$ .040$ .000$ 1.173$ Early$Market$Signals$ .171$ .112$ .127$ 1.186$ Late$Market$Signals$ .811$ .363$ .026$ 2.251$ Overall$Percentage$Correct$ $$ 78.4%$ *
The* final* table* (Table* 6)* the* relationships* between* peer,* expert,* and* market* quality* signals* and* the* financial* performance* in* later* career* stages* are* shown.* A* significant* relationship* is* found* between* the* variable* Early* Market*
Signals* and* Late* Financial* Performance* in* the* Primary* Market* at* a* significance*
level*of*p<*.001*(p=*.000)*and*a*positive*coefficient*of*B=*.773.*Moreover,*a*very* high*exponent*of*the*coefficient*B*(=2.167)$is$found.$A*further*significant*positive* relationship* is* found* between* Late*Expert*Signals*(Reviews)* and* Late*Financial*
Next,*we*find*significant*relationships*between*the*independent*variables*
Late*Peer*Signals,*Late*Expert*Signals*(Awards),*Late*Expert*Signals*(Reviews),*and* Late*Market*Signals*and*the*dependent*variable*Late*Financial*Performance*in*the* Secondary* Market.* Hence,* the* effect* of* quality* signals* emitted* by* peers* is*
significant*at*p=*.003*and*B*=*V.92*signaling*a*positive*relationship.*The*positive* effects*of*quality*signals*emitted*by*experts*are*significant*at*p<.01*(p*(awards)=* .004* and* p* (reviews)* =* .000)* and* B* being* positive* (B* (awards)=* .679* and* B* (reviews)*=*.160).*The*positive*effect*of*quality*signals*emitted*by*the*market*(B=* .811)*is*significant*at*p=*.026.*Later*expert*signals*in*the*form*of*awards*seems*to* have* the* most* tremendous* effect* on* the* financial* performance* in* the* primary* market*with*an*exponent*of*B*=*1.972.* * * * * * * * * * * * $
Limitations!and!Discussion!
* The* results* show* the* effect* of* quality* signals* from* various* selectors* on* other* selectors* and* on* the* financial* performance* of* an* artist.* Mix* evidence* is* found*for*the*hypothesis,*but*in*essence*they*confirm*the*core*assumption*that* the*selection*system*in*the*market*for*contemporary*art*is*best*explained*by*a* hybrid*model*that*is*influenced*by*all*types*of*selectors.**
First,*it*is*hypothesized*that*peer*selection*in*the*early*stages*of*an*artist* career* emits* quality* signals* that* positively* influence* expert* selection.* This* hypothesis* (Hypothesis* 1a)* is* only* partly* confirmed* since* the* relationship* between*early*peer*signals*and*reviews*in*the*early*stage*of*an*artistic*career*is* the*only*one*that*is*significant.*Thus,*signals*emitted*by*peers*in*early*stage*of*an* artistic* career* do* not* seem* to* influence* expert* selection* in* later* stages* of* an* artist’s*career.*This*finding*can*be*explained*by*the*scarcity*of*information*about* the* quality* of* an* artist* in* its* early* career.* Hence,* experts* rely* more* heavily* on* certain*available*quality*signals*in*order*to*evaluate*the*work*of*an*artist.*In*later* career* stages,* however,* this* information* may* be* less* relevant* because* the* relative*importance*of*peer*quality*signals*from*early*career*stages*diminish*and* are*replaced*by*later*peer*quality*signals.*Also,*quality*signals*from*other*sources* than*peers*become*more*salient.*In*this*respect*a*positive*significant*relationship* is* found* between* later* quality* signals* emitted* by* peers* and* later* expert* selection.*Similarly,*it*is*found*that*peer*recognition,*which*is*said*to*be*a*form*of* peer* selection* in* later* career* stages,* increases* the* likelihood* of* an* artist* being* awarded*at*later*career*stages.**
emits*quality*signals*that*influence*the*early*financial*performance*of*an*artist.* This*hypothesis*is*rejected*because*no*significant*relationship*is*found*between* peer* quality* signals* in* early* career* stages* and* early* financial* performance* in* either* the* secondary* or* primary* market.* Some* theory* suggests,* that* no* significant* relationship* should* be* found* because* very* few* artists* are* actually* financially* successful* in* early* career* stages.* Usually,* financial* remuneration* takes*place,*if*it*takes*place,*in*later*career*stages*as*explained*by*the*concept*of* differed* financial* success* (Pénet* &* Lee,* 2014).* Therefore,* an* artist* needs* to* be* recognized*by*various*groups*first*before*earning*some*returns*on*the*products.* Even* though* I* argue* that* peers* are* one* of* those* groups,* this* analysis* suggests* that* they* are* not* directly* responsible* for* pecuniary* benefits.* * In* this* regard,* signals*that*stem*from*peers*in*early*career*stages*might*not*be*relevant*for*the* financial* performance,* but* do* have* an* impact* on* experts.* Another* explanation* for*this*finding*lies*in*the*nature*of*the*data*about*early*quality*signals*emitted* by* peers.* These* data* are* available* to* only* a* small* subset* of* the* sample,* which* hinders* the* establishment* of* significant* relationships.* It* should* be* noticed,* however,* that* peer* quality* signals* in* later* career* stages* have* a* significant* relationship*with*the*financial*performance*in*the*secondary*market.*Therefore,* it*is*recognized*that*the*peer*selection*is*an*important*aspect*in*determining*the* financial*performance*of*an*artist.*
Hypothesis* 2a* predicts* a* positive* relationship* between* quality* signals* stemming*from*experts*and*market*selection*in*later*career*stages*of*an*artist.* This*hypothesis*is*confirmed,*although*only*expert*quality*signal*at*later*career* stages*increase*the*likelihood*of*market*selection*in*the*later*stage*of*an*artistic*
