Forgeries aside, that makes an artist, in an economic sense, a monopolist. And here’s where economic theory comes in, courtesy of Nobel Prize-winner Ronald Coase. In an important 1972 paper titled “Durability and Monopoly,” Coase proposed that a supplier with a monopoly on a durable good (say, a painting intended to last over time), can take certain actions to assure buyers that she or he will not “spoil” the market by flooding it with a surplus of goods. This serves to maintain a stable price. For example, the monopolist can create contracts stating she will not produce more than a certain amount annually.
Surely nothing could assure a collector more that an artist’s supply is limited than knowing her death is a few years away. But, Ekelund and Jackson point out, once an artist dies, a number of other factors might affect the supply of works immediately following death: Anticipating the popularized notion of prices increasing after an artist dies, collectors might bring an increased number of works to market, or the artist’s dealer might announce a number of works for sale and flood the market. The unpredictability of post-death supply makes it impossible to measure a post-death death effect, although it is likely that a rush of supply onto the market contributes to the fall in post-death prices documented by the researchers. By contrast, an artist’s output tends to slow as she or he approaches death, due to physical limitations.
Ekelund and Jackson tested their hypothesis by examining 6,118 auction records for paintings created by 17 post-war artists (14 of whom were men) who died between 1987 and 2013. For the artists examined, they found a steady uptick in price of 6% on average in the five years preceding death, followed by a roughly equivalent drop in the year of their death, a fall of 26% on average. After that, prices typically began to climb again. They controlled for factors such as size of the painting, the age of the artist, and the medium. Ekelund, in an earlier study of Mexican artists, had found a similar pattern.
Of course, once a general consensus is established that a deceased artist belongs in the canon, the prices for her or his (mostly his, historically) work can skyrocket, as demand rises alongside dwindling supply. See recent sales of ’s Salvator Mundi
for $450 million or the $110.4 million paid for a
painting last year for extreme examples of this phenomenon in action.