Forgery in the art market: a model of strategic fraud under uncertain authenticity

In the world of art, deception looms large, with some sources suggesting that over 50% of artworks may be forged or misattributed. While this revelation may not directly affect the aesthetic appeal of art, it has major economic consequences by increasing the risk faced by buyers. Art fraud, where sellers may strategically offer fabricated or misattributed artworks to inflate their economic value, is thus a critical concern. This paper develops a game-theoretic model of art forgery to understand the incentives driving the creation and sale of forged artworks. We show how market characteristics, such as the frequency of authentic works, the gains from trade, and the cost of forgery, jointly shape incentives to forge and to verify. In particular, a lower fraction of original artworks may reduce forgery by increasing buyers’ incentives to inspect, whereas higher gains from trade and lower forgery costs increase the likelihood that forgery arises in equilibrium. These factors affect not only the composition of traded artworks, but also the equilibrium regimes that emerge. On the policy side, stronger public detection has a surprisingly ambiguous effect: in intermediate cases, it crowds out private verification, leaving the share of undetected fakes unchanged.