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> Despite maybe seeming like a useless middleman, the reason market makers can exist is because they provide a valuable service to the buyer and the seller. We

> Despite maybe seeming like a useless middleman, the reason market makers can exist is because they provide a valuable service to the buyer and the seller. Well, and also because it's illegal in some states to buy directly from a car manufacturer, so you're forced to go to a dealership whether they provide value or not. Would eBay and Amazon be considered market makers, as they pair up buyers and sellers?

Erik816 5y ago
The example was used car dealerships. You can always buy/sell your vehicle in a private sale without requiring a used car dealership.
anchpop 5y ago
I don't think so. Market makers normally buy before having a specific seller in mind. I think eBay and Amazon's 3rd party sellers transact directly to customers, and just pay those sites a cut of each sale. eBay only is able to charge that fee (really, it's an economic rent) due to a monopoly enforced by network effects. A classic market failure. (I'm not as sure about Amazon but I wouldn't be surprised if a similar effect was at play.) New car dealerships really don't many any sense and regulated into existence haha. I was referring to used car dealerships
KennyBlanken 5y ago
You're not forced to buy a car from a dealer; manufacturers are forced to sell new cars through dealers in order to guarantee owners have somewhere to go for service and parts. Back in the early days of the auto industry car companies sometimes existed just long enough to sell some crappy cars and fold before angry customers with defective cars came calling. That's why the laws around manufacturers having dealers exist, no matter what Elon Musk tells you. Ever notice that bodywork, parts, and repairs for Teslas are very expensive and difficult to come by? Plenty of Teslas with relatively minor body damage end up in limbo for months or more even though the insurance company is ready to pay for repairs. Why? Tesla's bodyshops have long backlogs because there are no parts, because Musk is desperate to get as many cars out of his factory as he can. Lots of Teslas also get totaled because Tesla charges outrageous pricing for replacement parts. Musk is exploiting the insurance industry. Insult to injury is that Tesla can decide one day that your vehicle is too damaged for their tastes, and refuse to sell you parts. No other manufacturer does that, not even Ferrari, and that's really saying something.
- justinpombrio 5y ago
  How would forcing new car sales to go through dealerships prevent Tesla from making its parts rare and expensive? Wouldn't all Tesla parts come from Tesla anyways, and just go through the chain Tesla->dealership->consumer, instead of Tesla->consumer? (In case it's not clear, I'm legitimately curious and know basically nothing about dealerships.)

Erik816 5y ago

The example was used car dealerships. You can always buy/sell your vehicle in a private sale without requiring a used car dealership.

anchpop 5y ago

I don't think so. Market makers normally buy before having a specific seller in mind. I think eBay and Amazon's 3rd party sellers transact directly to customers, and just pay those sites a cut of each sale. eBay only is able to charge that fee (really, it's an economic rent) due to a monopoly enforced by network effects. A classic market failure. (I'm not as sure about Amazon but I wouldn't be surprised if a similar effect was at play.) New car dealerships really don't many any sense and regulated into existence haha. I was referring to used car dealerships

KennyBlanken 5y ago

You're not forced to buy a car from a dealer; manufacturers are forced to sell new cars through dealers in order to guarantee owners have somewhere to go for service and parts. Back in the early days of the auto industry car companies sometimes existed just long enough to sell some crappy cars and fold before angry customers with defective cars came calling. That's why the laws around manufacturers having dealers exist, no matter what Elon Musk tells you. Ever notice that bodywork, parts, and repairs for Teslas are very expensive and difficult to come by? Plenty of Teslas with relatively minor body damage end up in limbo for months or more even though the insurance company is ready to pay for repairs. Why? Tesla's bodyshops have long backlogs because there are no parts, because Musk is desperate to get as many cars out of his factory as he can. Lots of Teslas also get totaled because Tesla charges outrageous pricing for replacement parts. Musk is exploiting the insurance industry. Insult to injury is that Tesla can decide one day that your vehicle is too damaged for their tastes, and refuse to sell you parts. No other manufacturer does that, not even Ferrari, and that's really saying something.

justinpombrio 5y ago
How would forcing new car sales to go through dealerships prevent Tesla from making its parts rare and expensive? Wouldn't all Tesla parts come from Tesla anyways, and just go through the chain Tesla->dealership->consumer, instead of Tesla->consumer? (In case it's not clear, I'm legitimately curious and know basically nothing about dealerships.)