Working Paper: CEPR ID: DP13941
Authors: Graldine David; Christian Huemer; Kim Oosterlinck
Abstract: Proper inventory management is crucial for art galleries since the art market is highly illiquid, subject to periodic changes in tastes and that inventory represents one of the main costs of galleries. Yet, despite its importance, inventory management has been overlooked in the literature. This paper distinguishes four main strategies used by art dealers to manage their inventory: relying on commissions, on consignments, on speed of sale or on large inventories. We use this classification to set the inventory strategy of Goupil, Boussod & Valadon, a major art gallery active in France at the end of the 19th century, into perspective. Goupil’s books cover the sale of more than 25,000 artworks between 1860 and 1914. Rapidity to sell was a key element in Goupil’s strategy. Out of the sold artworks, almost 75% were sold within a year. Artworks which had been in inventory for a long time sold at a discount. Goupil required a slightly higher mark-up for artists from which he held a large inventory. Mark-up for artists in residence were lower, suggesting Goupil was ready to make a discount to establish their market. The likelihood to sell their artworks at a loss was also lower, signaling a preoccupation for their long-term market.
Keywords: art market; art investment; art gallery; Goupil Boussod Valadon; inventory strategy
JEL Codes: N14; N44; Z11
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| increased speed of sale (G14) | decreased duration artworks remain in inventory (Z11) |
| longer inventory duration (D25) | negatively impacts sale prices (R31) |
| inventory duration (D25) | influences pricing strategy (L11) |