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For people who can afford cars today -- Why wouldn't they? I'm not convinced economy of scale applies the same way in this case. Cars (and mattresses, etc) are

For people who can afford cars today -- Why wouldn't they? I'm not convinced economy of scale applies the same way in this case. Cars (and mattresses, etc) are large and infrequent purchases dominated by preference. Dealerships make most of their money through sketchy financing and tricks. There's a large class of financially illiterate people who routinely make massive mistakes like monthly income spend planning. Given an extra thousand per month, two hundred more on a car is both feasible and justifiable. Lifestyle creep. I would agree if the topic was commodities like eggs or rice -- sure, I purchase by efficiency. And I'm not sure about the SV strat and dealerships. It could work in theory, but as of today dealerships are basically fungible and signal the same way as each other. I have no idea how a dealership could signal their lower marginal costs, especially survive in an industry with insane scaling costs.

godelski 7y ago
Because you're only applying economy of scale to a single market. What I tried to illustrate is that different classes would spend the money differently. So it isn't just everyone buying cars. Come on, that's idiotic and unreasonable. But what I'm saying is that new people are entering MANY markets. Not a single one. That there are so many markets and that we are no where near full market capture (this is the important part) that thinking just rent would go up is also an unreasonable assumption.