The used car market

The second-hand car market is booming, with two-thirds of French people preferring second-hand vehicles to new ones. Over 500,000 vehicles were sold between January and March 2006. The automotive market may be sluggish, but the second-hand sector is in good health. More than 5,300,000 vehicles were sold in 2005, two and a half times as many as manufacturers managed to sell new. This long-standing phenomenon is growing. Today, 60% of all drivers have bought their cars second-hand. All vehicles are sold between private individuals, with six out of ten second-hand cars sold between private individuals without a professional intermediary. Economics includes a large number of theoretical markets in its models, but few of them deal with the second-hand market. Yet this market is gradually taking on a predominant role in the economy, and in some sectors, such as the car market, it can overtake the traditional market (the primary market). This market is characterised by the heterogeneity of its products, but also by the presence of asymmetric information. This is because...