Pricing in Opaque Markets: Paintings Old and New

Pricing is one of the more difficult aspects of marketing management and poses interesting problems for economists trying to account for what are really a collection of microsales that are not well reflected in aggregate macroterms. The developed models and processes work best for mass produced products but grow increasingly problematic when products are intangible services or unique goods. This paper looks at paintings as a product within a specific “industry” , but many of the issues are similar to those in the professional services (law, medicine, education) and auxiliary services (consulting, IT outsourcing, insurance). There are also aspects of this market which are sui generis—the intermediaries, various types of fraud and the social/cultural implications of the market. There are two particular aspects that are the focus in this paper: the general economics of pricing and investment in high end art and the effects of various types of fraud and opacity on pricing and investment returns.