| This dissertation consists of three parts:the preface, the main body and concluding remarks. The preface mainly covers the background and significance of the research, current status of research both domestic and abroad, definition of key concepts, the framework and research methodology of the dissertation. The concluding remarks give a summary of the research in the dissertation and point out direction for future research. The main body of the paper can be treated as four parts, details as follows.Part â… , which is chapter one, is the theoretic basis of the dissertation. First, this chapter hackles the history of incomplete and asymmetrical information theory, then connotation of related concepts and theories, and then analyzes the application of the theory in principal-agent relations and the resulting adverse selection and moral hazards. Secondly, the chapter talks about historical development of transactions cost theory, dimensions of transaction, the human factor and transaction factor affecting transaction cost, the measure and significance of transaction cost. Finally, the chapter briefs the elements and their relationship of art transaction mechanism.The second part, which is chapter two, traces the historical development of art transaction in China in accordance with three clues:the royal art sponsorship, the private art sponsorship and public art sponsorship. The royal art sponsorship dated back to Qin and Han dynasties, flourished in Tang and Song dynasties and declined in Ming and Qing dynasties. With rich financial support under royal art sponsorship, the artists created aulic art in pursuit of pure aesthetic excellence but, for fear of political persecution, their works tended to be isolated from real life. The royal family also bought art works from its people, but this kind of transaction was actually a kind award by the royal family to its people. Another line of art sponsorship is by the private consisting mainly of the aristocrats, the officials, the landlords and merchants. The private art sponsorship reached its prime during Yuan Dynasty with support by the Jiangnan Landlords, and Ming and Qing dynasties with support from Huizhou Merchants and Yangzhou Salt Merchants. Similar to royal art sponsorship, the private art sponsorship is actually in the form of labor service by the artists in exchange for life support. Compared with artists under royal sponsorship, the artists under private sponsorship enjoyed more personal freedom and less pressure from spiritual persecution; the private sponsors seldom interferes in artistic composition. Under public art sponsorship, which is market system, the artists had to make a living from direct sale of their works, and thus had to cater to the secular taste and often lacked in artistic innovation. But since they got directly involved in the market and social life, their works got much artistic nourishment from their social reality of life. The second section of this chapter gives a brief analysis on the current status and development trends of art market in China. First, I give an analysis on the size and the structure of art market in China. Second, with art auction as example,I briefed on the regional development of the art market in China and then on the market status of the different categories of art works in China, for example, the ancient Chinese art paintings, Chinese ceramics, oil painting etc. Thirdly, in the development trends of art market in China, I point out that:(1) the art market in China is now in the stage of co-existence of traditional market forms such as flea market, art consignment gallery, agent art gallery and art auction houses, and modern market forms such as online art auction and transaction, art investment fund, Art Exchanges (similar to stock exchange). Different forms of art market are in different levels of development;(2) in traditional art market forms, the primary and secondary markets are in the stage of dislocation, which means the art auction dominates the market status, and the power of capital surpasses that of academic judgment;(3) the art market is in transition from personal art collection to institutional financial investment in art.The third part, covering chapters three through five, is the core body of the dissertation. With the theory of incomplete information and asymmetrical information as an analysis tool, Chapter three first talks about uncertainty in perception of art works, features of supply and demand, the value of art works, determinants of prices of their artworks, the disproportional and convergent relationship between art prices and art values. The chapter further analyzes, from macro-and micro-level, the uncertainty of the conduct of artists and moral hazards, and their resulting economic and cultural harm their conducts may bring; the non-economic motives and limited rationality of the collectors and investors; the subjectivity of appraising conduct, limitation and generalization in knowledge, professional ethics, and personal factor in judgment of the artworks, of the connoisseurs, the non-independent standpoint of critics, all have some impact on human perception of the art works. These factors further aggravate the opacity and asymmetrical state of the art market and further hinder the smooth operation of the market. Finally, chapter three analyzes the situation of incomplete and asymmetrical information, and the corresponding adverse selection and moral hazards in the flea market, galleries, art auction houses, online art auction and transaction, art exchanges. Chapter four elaborates on the reasons of transaction cost in art market, which includes both human factors and transaction factors. The human factors refer to incomplete information, limited rationality and irrational and opportunistic motives of the market participants and their lack of credibility. Transaction factors include the liquidity of art works, changes in the macro-economic situation, related laws, regulations and policies, changes in operational strategies of the galleries and auction houses, transaction frequency and number of competitors. Chapter four also deals with manifestations of transaction costs in flea markets, galleries, art auction houses, online art auction and transaction, art exchanges. Chapter five deals with the impact on art market, of policies, economy, social and aesthetic trends, and technology. In the part of the policy, the chapter summaries the lessons and experiences in China's policies in art market, briefs on the impact of resale tax and import tax on the art market of Europe and USA. In the economic analysis, the chapter gives an overall review of the art collection booms in Chinese history and in current art collection in China, art collection and economy in the international perspective and the relatedness of art market with financial market, and examines the impact of economy on art market. Finally the chapter tries to deal with the effect of social and aesthetic trends and network technology on art market.From the discussions in chapter three through chapter five, we can conclude that it is the incomplete and asymmetrical information, limited rationality and opportunistic conducts of the market participants that lead to noises, opacity, high transaction cost and low efficiency in art market. The function of institutions is, by restraining limited rationality and opportunistic conducts in the condition of incomplete information and asymmetrical information, to ensure the efficient operation of economic activities. Thus I strongly believe that it is completely imperative to structure a set of rigorous transaction institutions regarding art market in China, which is the main topic of chapter six.In Chapter six, the author believes that, to structure transaction institutions regarding art market in China, we first need to start with updating our perception and consciousness. The runners of art works should have a high consciousness of labor division and coordination, modern commercial operation, brand and reputation; the runners and market participants should have a strong sense of law and legal liability and should accurately understand the role of capital in art market. Secondly, the guarantee of laws and regulations is essential in the art market. For that we need to modify and improve related laws and regulations. The author suggests we enact and pass Civil Credit Law, Art Agency and Agent Law, and Art Appraising and Evaluation Law. Civil Credit Law is a legal framework which is more than just on art market: enhancement of people's awareness of credit and credit culture can effectively help to prevent risks, minimize opportunistic conducts and reduce cost of social operation. Art Agency and Agent Law and Art Appraising and Evaluation Law help to regulate conducts of art appraisers and connoisseurs and strengthen their sense of legal liabilities. We need also to modify related provisions of The Auction Act so as to update its responsiveness and effectiveness to art auction. Thirdly, we need to come up with favorable policies in terms of fiscal support, finance, tax and insurance and rigorously cultivate market players and medium agencies and enhance their competitiveness; to construct credit system in art, art appraising and evaluation, art agency system and criticism system. Finally we should strengthen the self-discipline of the industry to maintain the mechanism of self-regulation and reputation; we need also to popularize art competence of the people and advocate healthy and rational culture of art collection and investment. A large group of art consumers and collectors who really understand and love art constitute the solid basis for a rational and healthy art market.The innovations of this dissertation lies in the facts that:(1) this is the first research that applies the theory of incomplete and asymmetrical information to analyse the uncertainties of the art works and participants of art market, and to probe into the asymmetrical information and related adverse selection and moral hazards in different art markets.(2) This is the first research that utilizes the theory of transaction costs to probe into differential features affecting transaction costs in traditional and modern forms of art market.(3) This is the first research in China that summarizes the financial characteristics of art market and then uses them in analysis of art market.(4) This is the first research that, on the basis of analysis of asymmetrical information and transaction costs, advocates the construction of a full set of transaction institutions for art market including civil credit system, to minimize noises, to promote the transparency, fair competition and enhance operational efficiency of art market.The above-mentioned four points are the first trials in research of similar field in China.For wide coverage of knowledge, complicatedness of situations in trade institutions of art market, incomplete data and inadequate academic learning and vigor, there are some points, to my regret, that I did not fulfill:1. The dissertation gives out macro-framework of transaction institutions of art market in China, but fails to give detailed elaboration on the specific use of theories and the their integration of the theories into current laws, regulations in China. For some points I still fail to touch on or have dipped into. Beside the views from new institutional economics, information economics and behavioral economics, we need to try the use of new theories and new perspectives since the current methodologies and means remain simple2. We still need to further detailed research on the subsystem of the institutions, the relationship among the subsystems and their combined impact on art market.3. We need to further study on art price index and conduct more quantitative research on art market. For now no comprehensive index can reflect changes of art prices. And such an index can help us to give accurate financial analysis on art prices.4. The dissertation fails to compare the laws and regulations on art market in China with those of other countries. We need to conduct more research on laws and regulations of other countries.Finally, due to my lack of academic competence, narrowness of my thought of mind and no direction from related theories, some of the opinions and discussions have not been elaborated to the full. These regrets and omissions should be the direction for future research.
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