Basquiat and the Illusion of Art-Sotheby and Price Manipulation

A Basquiat to 110 million: Market Inflation

Jean-Michel Basquiat was an American artist, poet, musician, draftsman and painter who died at age 27 in 1988 for a drug overdose. He was a prolific creator of graffiti and other works, which initially sold up to $ 20. A few years after his death, prices began to skyrocket by a mechanism shown below. For start, this work was sold at 32,000 pounds (42,600 euros).

An iconic work, "Love is in the Air," was sold in 2013 at an auction of the Bonhams house in London for $ 249,000.

In 2008 was sold the work Keep it Spotless for 1.8 million dollars.

In April 2017, Sotheby's confirmed the sale of Untitled (1982) to a Japanese collector for 85 million pounds ($ 110.5 million) at an auction in New York. In 1984 this work was bought for 19,000 dollars. In a previous auction, this work had already been sold at $ 57.3 to the same collector.

Why this phenomenon? The creation and manipulation of market, in which exist the sellers (the galleries) and buyers. Buyers have a lot of money, no doubt, and are willing to pay very high amounts because they have the need or obsession to prove their economic power before others, because they consider the purchase as an investment, because they want to enjoy a unique work (the effect Snob at its highest level), perhaps as a form of money laundering or because it is intelligent market manipulation planned and performed by art galleries. Otherwise, how do you explain that a work that 30 years ago cost $ 19,000 now has a price of 110 million? The reasons are multiple and this moves the demand curve. In the demand equation, ha variable G is strongly manipulated.

Qd = f (Px, Pc, Ps, I, G, ceteris paribus)

Where: Px, PC, Ps = price of the good, price of substitutes and complementary goods

I ,  G = Income, preferences (the variable being manipulated)

As long as there are people with lots of money, manipulable or complicit in market deviations, prices will continue to rise. I bet that sometime that painting of Bansky, Untitled, will cost at least 200 million dollars. It should also be remembered that Sotheby's and other galleries form an oligopoly, so this practice is not surprising although in the art market the distortions are hallucinating. If you had hundreds of millions of dollars in your bank account, would you pay 110 million for Bansky Untitled? What drives you to that?

References

Bansky

http://www.telegraph.co.uk/news/2017/05/19/basquiatpainting-fetches-record-1105-million-new-york-auction/

Viewpoints: Top 25 Most Expensive Banksy Works Ever
http://arrestedmotion.com/2011/09/banksy-top-25-most-expensive-works-ever/

Freeman Nate (2017) Sotheby’s, Phillips Reveal Top Lots for May Postwar and Contemporary Sales in New York

http://www.artnews.com/2017/04/19/sothebys-phillips-reveal-top-lots-for-may-postwar-and-contemporary-sales-in-new-york/