Shades of Gray: Product Differentiation in Antiquities Markets

The market for antiquities is characterized by quality uncertainty in two senses. First, most market participants cannot distinguish between genuine antiquities, fakes, and forgeries. Second, it is difficult to identify stolen, looted, and illegally circulating artifacts. Trading in high-quality antiquities thus requires solving an Akerlofian lemons problem in two dimensions. However, because quality is so opaque, many buyers are indifferent to one or both dimensions. This creates what might be termed a lemons opportunity: entrepreneurs create institutions to maintain separate platforms for trading artifacts of different quality profiles. We analyze the private for-profit governance that facilitates transactions in eight submarkets and protects them from criminality, opportunism, and law enforcement.