Informal Property Rights in the Art Market

Abstract: Commercial certainty requires secure property rights. In advanced economies citizens implicitly assume that the law defines ownership and that they can rely on the state for enforcement. However, we show that formal property rights can be contradictory, fluid, and impossible to enforce – especially in global markets. Legal titles are insecure if there are socially legitimate claims for the restitution, transfer, or restriction of private property rights. We consider such socially legitimate claims as informal property rights: supported by social norms but without basis in domestic law. We study the global art market to examine the relative strength of formal vs informal property rights, the private institutions created to protect informal property rights or resolve conflict between rival claimants, and the responses of policy-makers to shifting social norms. We analyse whether owners of objects with rival claimants choose to resolve or evade ownership disputes based on transaction cost theory.