Dealer Networks in the World of Art

We apply network theory to study auction outcomes in the fine art market. Using a unique historical data set, of London-based art auctions that took place between 1741 and 1913, we investigate the drivers of strategic network formation between dealers (buyers) and sellers and the effect of network structure on artwork prices and market exit. The network size and similarities in art specialization between trading partners strongly influence the decision to form links. A larger network and a higher degree of specialization exacerbate informational asymmetries across buyers leading to higher rents through lower prices and facilitate longer market presence.