Do art specialists form unbiased pre-sale estimates? An application for Picasso paintings

This work investigates whether art specialists provide good predictors of realized prices for Picasso paintings. A sample selection model is proposed to represent the decision of the seller and the price equation. The model is applied to data on 675 Picasso paintings for the period 1975-1994. It is found that the two auction houses, Sotheby's and Christie's, have given good predictions for the works that have been sold. However, for the unsold works, it would have been possible to give estimates better than those given by the salerooms. As a consequence they could perhaps have sold more paintings than they actually did.