The art of pricing

Artist Candice Gawne says she and her husband recently sat down at the kitchen table to get back to basics: How much should she be asking for her delicate glass and neon sculptures? "It was funny," she says, "like going back to the beginning of my career. I was adding up my materials - which are very expensive - and my time. And, of course," she adds with a self-deprecating laugh, she wanted to factor in "a little bit for a small profit."

The computation was sticky because this successful, 40-year veteran of the southern California art scene is no beginner. She began her career as a painter and knows the pleasure of seeing her art works fly off gallery walls for thousands of dollars. But now that she has taken up a less mainstream medium, and chosen to display the work in her San Pedro studio rather than in an upscale L.A. gallery, she says that pricing the art is "the most difficult thing for me to do as an artist."

Hard as that may be for Ms. Gawne, the whole concept of creating - or understanding - the sticker price for a work of art is even harder for the average observer. Consider the $82.5 million doled out by a Japanese collector for Vincent Van Gogh's "Portrait of Dr. Gachet" - the most money ever paid for a single work of art. Ask yourself, do you know why the painting was worth that much?

The easy answer is, of course, "it's Van Gogh, silly. And his paintings are worth lots of money, right?"

But how did they become that expensive? And why weren't they worth even a tiny fraction of that during his lifetime? (Van Gogh has set the gold standard for living and dying as an impoverished artist.) Inspired by a show that just opened at the Getty Research Institute at the Getty Center, "The Business of Art: Evidence from the Art Market," the Monitor paints a picture of how art gets a price tag. [Editor's note: The original version incorrectly referred to the Getty Museum instead of the Getty Research Institute.]

Ultimately, the auctions, collectors, and dealers set the prices on art, says Valerie Colston, art professor at American Public University System.

Of course, these institutions rely on the willingness of an art-buying public to open its checkbooks. While that may seem to give control to the purchaser, professor Colston notes that, "in reality, most people don't trust their judgment when it comes to art."

Consequently, she says, the art world has capitalized on the fact that most people believe they can't really understand why a work of art is worth what the market is asking.

It helps to realize that the process of setting value is different for dead artists such as Van Gogh, whose works now trade more like commodities, and living artists, whose worth is still being determined, particularly if they are young.

"We handle very few young artists," says Blake Koh, director of fine arts at Sotheby's West Coast, the renowned auction house. "The only reason we might put them in a show is we think they will do well based on how they've already sold with dealers and art fairs."

Auctions rely on what's known as provenance - everything about a work of art including previous sales prices and owners - as an indicator of what something is worth. "We wouldn't try to price a young artist with no track record," he says.

That job falls largely to the dealers, says Getty curator Mark Henderson. "We see that this price setting can go back and forth, but history shows that the dealers are the most influential force behind the marketplace."

The Getty exhibit, which runs until June 13, showcases some of history's most influential dealers, including 20th-century connoisseurs such as Leo Castelli, Peggy Guggenheim, and Joseph Duveen.

The prize for sheer marketing chutzpah goes without question to Duveen, a Briton, who specialized in decorating the homes of America's wealthy (and culturally insecure) with Old Masters and complementary antiques.

The curators point out that Duveen helped shape some of the great private collections and art markets of this past century, often with the help of a vast network of spies who infiltrated homes of the wealthy to pick up information on artworks that might become available for sale as well as the personal tastes and buying potential of possible clients.

But all these shenanigans question the definition of real worth, according to collector and artist Joel Gilman, who says he never buys art purely as a financial investment.

"Without question, I buy art based on how I feel about the artist; my gut reaction to the work," says the collector, whose Beverly Hills home brims with acquisitions in every room. He often buys from young, untested artists - sometimes providing them with their first sale.

Mr. Gilman advises neophytes to be prepared to cut their prices if an important collector shows interest. He sees the discount as an investment because it will bring other buyers to the artist, explaining that the goal is to be in the best company possible. Value breeds value.

"The most important thing you can do is get your work into serious collections where it will be seen by other serious collectors," he says. "It's almost worth it to give it to them."

Gilman's guidelines for anyone interested in buying the young and untested is similar. "Buy what you love and trust your taste," he says. With new talent, don't expect investment art, he says, adding that he has his own rule of thumb for what constitutes a fair price.

"If I really love a piece of art and it's a young artist, I'll pay anything under $750 without a question. You can look at it and evaluate it almost as a piece of decorative art," he says with a small laugh.

In the end, regardless of where the work is sold - directly from the artist, at auction or from a dealer - the price is determined by what the market will bear, says Los Angeles dealer Gloria Delson.

A smart buyer will do his homework, she says. That way one can account for where the artist has exhibited his art, where he went to school, and who else has bought his work. And with today's proliferation of art fairs and the blurring of the line between fine art and the crafts world, Ms. Delson says buyers must do such research if they truly want to get a fair price, real value, and an enduring work of art.

"It makes it harder than ever for the insecure buyer," she adds.

Not to mention the artist testing new waters, according to Candice Gawne. She and her husband finally settled on prices that range from $1,500 to $10,000, depending on size and materials.

The artist points out, for example, that the exotically colored gasses, the necessary glass tubing, and power sources are very expensive.

Even so, customers at early exhibitions at her home studio marveled that the prices for the pieces were very reasonable.

"That means they're probably too cheap," laughs Gawne.