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Notes
On a related note, the authors claim to be introducing the notion of ‘reputational externality’ to the literature. They also claim to have been using the term in their classrooms for decades. But the notion that the behavior of the member of a profession or group can reflect poorly on all other members, and that these groups will respond by policing their members’ behavior is hardly new. Indeed, it has been used to study guilds, trade networks, organized crime groups, and many other social institutions before.
See, for instance, the work of Greif (2006) and Leeson (2007) on how parties in highly risky situations develop strategies that bring all parties’ incentives closer into alignment. Perhaps the framework best fitted to analyze the implications of the sources of production risk identified by the Nelson and Zeckhauser is the one first formulated by Cheung (1983) and Barzel (1997) and fruitfully applied by Allen & Lueck (2004), among others.
In a related contribution, Etro (2018) applies an equilibrium framework to study the determinants of prices for painting commissions in Renaissance Italy, finding evidence of significant competition in that market.
But perhaps Vermeer, unlike Van Goyen, enjoyed significant market power. In this scenario, the Dutch master would have produced few paintings so that he could charge such high process.
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Piano, E.E. Risky business? A review of Jonathan Nelson & Richard Zeckhauser’s Risk in Renaissance Art: Production, Purchase and Reception. J Cult Econ 47, 547–554 (2023). https://doi.org/10.1007/s10824-023-09483-w
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DOI: https://doi.org/10.1007/s10824-023-09483-w