Because the intrinsic value of an artwork is limited to the cost of material, its value is largely driven by highly subjective externalities: fashion and collector’s tastes. As a result branding and marketing have a disproportionately large effect on value, particularly in the case of art produced by contemporary artists. Top primary market galleries invest much time and money into launching their artists’ careers with the sole purpose of creating a market and increasing their artists’ prices over time.
An artist, artist movement or entire period can be in vogue for decades and suddenly move out of favor, with potentially detrimental effects on the value of their work. This subjectivity (sometimes referred to as the passion premium) forms a substantial component of an artwork’s value (much larger, than for example, in real estate, where the passion premium exists too). It is this subjectivity, often combined with a lack of comparable price points, that makes it so common for two appraisals of the same object to vary wildly.
The art market is, in many categories, still a supply-driven market. For some artists, rarity is an important driver of value whereas for others the market seems, for now, to be able to endlessly absorb their work. Andy Warhol, who was a prolific artist, is such an example: his work is traded frequently and many of his works achieve stellar prices. That said, if a work is fresh to the market or rare (i.e. in the case of Dutch Old Master Johannes Vermeer of whom less than 40 paintings are claimed to exist worldwide), collectors and dealers will pay a premium.