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Abstract

How do prices for contemporary art come into being? Buyers of contemporary art face a problem of fundamental uncertainty, because what passes as quality is difficult to determine, and buyers can hardly estimate how a specific piece of art will perform as an investment. Since a market for contemporary art presupposes the possibility of at least limited rational purchasing decisions, uncertainty must be reduced. We argue that the value of an art work or artist originates in an intersubjective process of assessment and conferring of reputation by experts in the art field, such as gallery owners, curators, critics, art dealers, journalists, and collectors, who help establish the artistic reputation of a work or an artist. The quality signals emerging from the art field enable buyers to assess the economic value of art works. We tested this initial hypothesis against two datasets containing data on art prices and information from the biographies of artists.