In the US anything goes, at any price

  In the last two years, the art market has been attracting ever more aficionados in the US. But American collectors are happier to buy than to sell, and the consequence is a host of buyers eager to snap up the few artworks that do come up for auction. While unsold ratios are on the rise in Europe they are falling in the US, in any price range. In May 2002, just 17% of US lots remained unsold compared to nearly 37% in the rest of the world.

The more expensive the artwork, the greater the risk it will be bought in. Logically enough, above a certain price level collectors become more demanding (around USD 10,000). In the first half of 2002, 80% of works with estimates of USD 1,000-10,000 found a buyer in the US. But for estimates of USD 10,000 and more the figure falls to 73%. Supply and demand rules the market. Classically, the more expensive the works on offer, the fewer collectors there will be on the auction floor with the means to bid. Since many lots, in some price ranges, do not attract bidders, they are automatically bought in.

For works over USD 1 million, even by reducing the minimum bid, auctioneers will find it hard to find a buyer in the room. In this bracket demand is highly inelastic to price. In contrast, at the “cheap” end of the market, buyers and sellers are thicker on the ground and competition is more intense. Also, below USD 1,000, buyers may change their behaviour and are more likely to substitute one work for another. In this price-range a lot with an over-ambitious estimate can easily find a buyer if the auctioneer accepts a lower price. Demand becomes more elastic lower down the price scale.

In such circumstances, it is in the auction houses’ interest to foment competition among art buyers by holding auctions with a wide range of works drawn from the same price bracket.