The Auction Circuit.
“Resistance and change often begin in art, and very often in our art; the art of words…the name of our beautiful reward is not profit, it is freedom.”
— Ursula Le Guin
How the Art auction process actually works.
Art, unlike many other economic sectors of investment, is a scarcity good, as each piece is strictly one of a kind. Meaning that art pieces are constantly being revalued. and changing in value over time due to cultural and historical relevance, and institutional validation, thus affecting price.
The inherent meaning of these pieces, one could argue, is essentially that of what the market determines it to be, post-death of the artist. Therefore, these pieces that are being sold for millions, even hundreds of millions of dollars, are not deemed to be worth it because of the artist themselves and what the piece meant to them when they created it, but instead the interpretation and scrutiny that was left behind and picked up and determined by the wealthy collectors and institutions that inherited the piece, and later sold it as it regains value silently over time.
The art market is a fast-paced system vulnerable to volatility as it is constantly moving, being traded, stored, or sold. Art is typically publicly sold through two markets, Primary and secondary. Auction houses are a popular secondary market, where they sell publicly to whoever will pay the most. The journey of artworks from private collections to museum walls is one through the world of both secondary and primary markets, acquisition, and investment. Dominant forces in the art auction world at auction houses Sotheby’s and Christie’s, the word “auction” itself is Roman, meaning to “ascend”. Both UK-based auction houses have refined and developed what the modern details of an auction protocol are.
Glossarry of key terms for auction houses
Reserve Price
The minimum price that a seller would be willing to accept from a buyer for an art object. (Goodbody, 2025)
Buy-In Fee
A charge the seller pays to the auction house/seller even if their artwork does not find a buyer. This payment covers the costs of the listing itself and marketing the piece as part of curated collection for sale (Goodbody, 2025).
LDL
This acronym stands for Loss, Damage, Liability. This refers to an insurance fee (Goodbody, 2025).
The journey for an art object often begins in the consignment process. Here, the individuals or owners of the art send it to the auction houses to be sold at auction. Typically, this process begins by submitting the artwork for review and validation. Unless the artwork is highly valuable or well-known, the seller is often not speaking directly to the art specialists who review the artwork at this stage. Then, an estimate is given using the hedonic models for pricing. This price can and usually does evolve as the process for consignment continues (Goodbody, 2025). Typically, the deadline for consignment before an auction is a month before it begins. The seller has limited control over what else will be presented alongside their piece at auction; for example, if multiple prints of the same edition are sold, it can diminish the price and therefore rarity of their piece at auction. The supply and demand model is important for the curators of the auction to recognize as well (Goodbody, 2025).
Photo : Christie’s
Valuation for art is a process that employs specialists with extensive knowledge across various fields of the art market. They appraise, authenticate, and examine the art object. Art house estimates not only include the historical context of the piece, but also the style, dimensions, state of preservation, and techniques and materials used (Sotheby’s, 2023). Once consigned, the auction house will provide the seller with an estimate for their art object and agree on a reserve price for their piece. There is also typically a standard fee of around 15% of the piece, as well as a buy-in fee that is usually negotiable with the auction house (Goodbody, 2025). Historically, there are three main reasons artwork goes to auctions in the first place. Those being the three “D’s”. Debt, death, and divorce. These circumstances frequently compel people to part with their art objects (Sotheby’s, 2023).
The specialists determine a high and a low for the piece. In theory, this price point should reflect the reality of a hypothetical auction. Historically, the table below reports testing for price differences between identical prints, and wine bottles sold at different times at different auction houses in the United States and Europe. The table notes that prices do fluctuate, but differences when they do exist are rather small. Ashenfelter and Graddy hypothesize this is due to the auction institution itself, with commissions, experts and their pre-sale estimates, reserve prices, and sequential sales, all have an influence on the actual final price at hammer of the art object.
“Art auctions remind us that the value of art is not just in its price, but in the stories, history, and emotions it embodies,” says Maria Sancho-Arroyo, Faculty, MA Art Business at Sotheby’s Institute of Art-New York.
Sotheby’s
Once consigned, the auction house will provide the seller with an estimate for their art object and agree on a reserve price for their piece. It is important to understand that auction results do not always reflect the actual amount the seller will receive (Goodbody, 2025). Typically, there is a percentage taken after final sale, a standard fee of around 15% of the piece, as well as a buy-in fee that is usually negotiable with the auction house (Goodbody, 2025).
One of the most riveting auction battles in Sotheby’s History, a painting by Jean-Michel Basquiat was bought for $110.5 dollars. Auctioner Oliver Barker fields bids between two collectors determined to take home the monumental masterpiece, the star of Sotheby’s Contemporary Art Evening Auction. This video shows the process of a live auction in action.
Art House controversy
However, one of the largest legal cases in the art market. Christie’s and Sotheby’s illegally colluded in the 1990s to fix seller commissions and eliminate competition between the two houses. In 1995, Christie’s announced they would charge sellers a fixed commission on the sales price; a month later, Sotheby’s announced it would do the same. Essentially, overcharging clients by agreeing on an identical commission structure. Fixing the seller’s premium, agreeing to charge the same commission so sellers could not negotiate or find a cheaper alternative. Further, they agreed to identical buyer premiums. By making this deal to charge the same fees on both buyers and sellers and discontinuing discounts, they removed price competition and made it so clients had to pay high costs.
This violated U.S antitrust laws. After Christie’s cooperated with authorities in 2000, both auction houses paid over half a billion dollars in fines and settlements, and Sotheby’s CEO Diana Brooks was convicted. The case remains one of the most significant antitrust violations in art market history. Sotheby’s estimated that the collusion on sellers’ commissions was around 10$-15$ million per year of the collusion. Assuming Christies was the same, the total damages suffered by sellers were $20-$30 million per year. According to the testimony of Diana Brooks, the buyers and sellers who had transactions during the time of this silent collaboration were fully compensated. This trial on price fixing reveals the roles an auction house plays in pricing for individual art objects. The evidence for both major art houses, and supported by Ashenfelter and Graddy, supports the fact that some evidence indicates that auctioneers are trying to truthfully price each art object as they can, while other evidence suggests that auctioneers may be altering an estimate away from the predicted value.
The values presented here are based on the past actions of auction houses and exuberant wealth that goes in and out of the entire auction process. It is important to note that the pieces sold in these auctions are sold after the artist has passed. Often, against the will of the artist, supported by their methodology when they were still alive. In the modern art world, where the artists are dead and all that survives are the pieces that people believe best represent them and their lifetime of work, I am left with a question. In the art market, the assets involved for profit are explicitly tied and dominated by the upper class, by capital, from foundations to galleries to auction houses. Through tax loopholes in freeports to laundering through artwork. I wonder when the meaning of each piece gets explicitly lost in the attempts for sale, and what the public should be aware of when viewing million-dollar artworks in museums, and sold at galleries and at auction? The most common strategy of “buy low, sell high”, represented by United States V. Diana Brooks, alongside a private partnership with Christie’s, exemplifies the private art gallery and auction system and the spread of reserve and estimate prices. In addition to receiving fees based on how each piece sells, auctions and galleries publicize the high sales cost of the works they sell to justify even higher prices.