nep-cul New Economics Papers
on Cultural Economics
Issue of 2005‒06‒14
six papers chosen by
Roberto Zanola
Universita degli Studi del Piemonte Orientale

  1. How to Win Twice at an Auction: On the Incidence of Commissions in Auction Markets By Ginsburgh, Victor; Legros, Patrick; Sahuguet, Nicolas
  2. The Economics of Books By Canoy, Marcel; van der Ploeg, Frederick; van Ours, Jan C
  3. Testing for Reference Dependence: An Application to the Art Market By Beggs, Alan; Graddy, Kathryn
  4. What Determines the Future Value of an Icon Wine? New Evidence from Australia By Anderson, Kym; Wood, Danielle
  6. Contingent Valuation and Random Utility Model Estimates of the Recreational Value of King Mackerel By John C. Whitehead

  1. By: Ginsburgh, Victor; Legros, Patrick; Sahuguet, Nicolas
    Abstract: We analyse the welfare consequences of an increase in the commissions charged by intermediaries in auction markets. We argue that while commissions are similar to taxes imposed on buyers and sellers the question of incidence deserves a new treatment in auction markets. We show that an increase in commissions makes sellers worse off, but buyers may strictly gain. The results are therefore strikingly different from the standard result that all consumers weakly lose after a tax or a commission increase. Our results are useful for evaluating compensation in price fixing conspiracies; in particular they suggest that the method used to distribute compensations in the class action against auction houses Christie’s and Sotheby’s was misguided.
    Keywords: auctions; commissions; intermediation; welfare
    JEL: D44 L12 L40
    Date: 2005–01
  2. By: Canoy, Marcel; van der Ploeg, Frederick; van Ours, Jan C
    Abstract: The tensions between books and book markets as expressions of culture and books as products in profit-making businesses are analysed and insights from the theory of industrial organisation are given. Governments intervene in the market for books through laws concerning prices of books, grants for authors and publishers, a lower value-added tax, public libraries and education in order to stimulate the diversity of books on offer, increase the density of retail outlets and to promote reading. An overview of the different ways by which countries differ in terms of market structures and government policies is given. Particular attention is paid to retail price maintenance. Due to differences between European countries it is not a good idea to harmonise European book policies. Our analysis suggests that the book market seems quite able to invent solutions to specific problems of the book trade and that, apart from promoting reading, there is little need for government intervention.
    Keywords: authors; books; diversity; internet; libraries; monopolistic competition; publishers; retail price maintenance; subsidies
    JEL: D40 D60 L10 L40 Z11
    Date: 2005–02
  3. By: Beggs, Alan; Graddy, Kathryn
    Abstract: This paper tests for reference dependence, using data from Impressionist and Contemporary Art auctions. We distinguish reference dependence based on ‘rule of thumb’ learning from reference dependence based on ‘rational’ learning. Furthermore, we distinguish pure reference dependence from effects due to loss aversion. Thus, we use actual market data to test essential characteristics of Kahneman and Tversky’s Prospect Theory. The main methodological innovations of this paper are firstly, that reference dependence can be identified separately from loss aversion. Secondly, we introduce a consistent non-linear estimator to deal with measurement errors problems involved in testing for loss aversion. In this dataset, we find strong reference dependence but no loss aversion.
    Keywords: art; auctions; loss aversion; Prospect Theory; Reference Dependence
    JEL: D44 D81 L82
    Date: 2005–04
  4. By: Anderson, Kym; Wood, Danielle
    Abstract: To what extent can the future price of icon wines be anticipated from information available at the time of their initial sale by wineries? Using a hedonic model we show that weather variables and changes in production techniques, along with the age of the wine, have significant power in explaining the secondary market price variation across different vintages of each of three icon Australian red wines. The results have implications for winemakers in determining the prices they pay for grapes and charge for their wines, and for consumers/wine investors as a guide to the prospective quality of immature icon wines.
    Keywords: hedonic pricing model; investment under certainty; wine quality
    JEL: C23 D12 D44 D80 G12
    Date: 2005–05
  5. By: Eduardo L. Gimenez Fernandez (Departamento de Fundamentos de Analisis Economico e Historia Economica. Universidad de Vigo.); Manuel Gonzalez-Gomez (Departamento de Fundamentos de Analisis Economico e Historia Economica. Universidad de Vigo.)
    Abstract: In this paper the efficient allocation of natural recreational areas is anal- ysed. Natural recreational areas have the features of public goods. We present the efficient allocation of this non-excludable public good in a rational general equilibrium model with heterogeneous agents. This allows us to deal with the free-rider problem in the provision of the public good. This framework could be considered as a microfoundation of the Lopez, Shah and Altobello (1994) model. In addition we study both the "existence" value and the "use" value of the recreational area in the same setting. A methodological critique is also made of previous empirical literature. It is suggested that our theoretical framework is a suitable starting point for further empirical research. Finally an empirical application for the Galician case is presented. Our results sug- gest that current allocations of land to natural recreational areas in Galiza are not efficient.
    Keywords: Land Allocation, Efficient Allocation, Natural Recreational Areas, Public Good, Social Planner Problem, Voluntary Contribution Competitive Equilibrium, Use Value, Existence Value
  6. By: John C. Whitehead (Appalachian State University)
    Abstract: This paper estimates the value of king mackerel bag limit changes with both stated and revealed preference methods. The 1997 Marine Recreational Fishery Statistical Survey allows estimation of the value of avoiding bag limit reductions with the random utility model and the contingent valuation method. Using the contingent valuation method, the willingness to pay to avoid a one fish reduction in the bag limit is $2.45 per year. Using the random utility model, the willingness to pay to avoid a one fish reduction in the bag limit for a two-month time period is $10.83. Considering several methodological issues, the difference in willingness to pay between the stated and revealed preference methods is in the expected direction.
    JEL: Q51
    Date: 2005

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