The $12 Million Stuffed Shark

Thompson, an economist, examines how prices are set in the contemporary art market. The title refers to Damien Hirst's preserved shark, sold to Steven Cohen for a reported twelve million dollars, and Thompson uses it to ask what a buyer is actually purchasing at that price.

His answer is branding at every level. The auction houses, the dealers, the artists, the collectors and the museums each carry a brand value that transfers to the object. A work by an unknown artist has almost no value; the same object attributed to a branded artist, sold by a branded dealer, previously owned by a branded collector, and exhibited at a branded museum, is worth orders of magnitude more. Thompson explains the specific mechanisms: how auction houses use guarantees and third-party irrevocable bids to manufacture the appearance of demand, how dealers ration access to work by desirable artists in order to place it with collectors whose ownership raises the artist's standing, how the primary and secondary markets are deliberately separated, and how art fairs concentrate decisions into a few days of social pressure.

For investors the useful content is the market structure analysis: an opaque market with no disclosed transaction data, where intermediaries control both supply and information, and where price is a function of the credibility of the participants rather than of any property of the object. Thompson is sceptical about art as an investment class and shows that published art indices are constructed from repeat sales of works that sold, which excludes everything that failed. The book is from 2008 and the market has grown and changed since, particularly with online sales and with the rise of Asian buyers.