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Faculty Sponsor

Susan Wolcott

Abstract

Droit de Suite (DDS), or the Artist’s Resale Royalty, is a law enforced in the European Union that requires a royalty fee to be paid to an original artist every time a painting is resold. Those in favor of a royalty believe that an artist should be able to take part in the success of his or her work after the first sale, as pieces often appreciate significantly in value in subsequent sales. A study on the effect of DDS on markets can show whether this law is an appropriate response to the moral issue.

This paper features unique data of Post-War and Contemporary paintings sold between 2004 and 2015 by Christie’s. This paper measures the effect of DDS on the art market by tracking the displacement of sales and a depression in prices. I estimate an equation predicting art prices, and then I examine the effect of DDS on this equation. My results suggest that, first, provenance significantly contributes to value; second, that there is evidence of the “afternoon” effect in art auctions; third, that DDS may impact works of lower value negatively; and, finally, that DDS does not affect the very high end of the market. These results enforce the theory that a royalty affects the lower end of the market, while expensive works absorb the cost of the royalty.

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