Wheeler Dealers - a good illustration of price setting mechanisms

We know that these programmes became more and more staged with each successive series, and the numbers don’t add up etc, but there is still a lot of truth in them. Let’s assume that they are true to life, the three stages are a good illustration of monopoly and competitive price setting.

Stage 1. Mike goes to see some ‘classic car’. These aren’t being made any more, so supply is fixed (and gradually dwindling)and prices are set purely by demand.

It’s a variation of the normal supply/demand thing, the only reason why some of the cars they buy and sell are worth that much is because they are so rare. In one episode they sold a Bond Bug for £8,000, FFS. I assumed they’d jumped the shark, but if you look online, that’s what the best ones sell for.

So Mike haggles quite ruthlessly. The seller only has one car to sell and wants/needs cash, Mike has cash but can walk away and buy something else instead.

Stage 2. Mike gets the wheels refurbished and Mike or Edd get the seats reupholstered and/or the car body sprayed etc. They hardly ever haggle on the price because they know full well that if they fail to offer the market rate for labour, expertise, use of plant machinery and supplier’s profit, then the work simply will not get done. Presumably they go to the supplier with the best price/quality mix, and the supplier knows it. When they make a half-hearted attempt at haggling, the supplier tells them to piss off, so they always cave in and pay asking price.

Stage 3. Finally, there are always some bits and pieces like a bumper or some trim which need to be replaced with original parts. The monopoly boot is now on the other foot. The stockist who happens to have an original bumper for exactly that model is in no hurry to sell, it’s been on a shelf for years and could stay there indefinitely; but the stockist knows that his bumper is the only one available.

Mike sells cars to purists for top whack, but he can’t sell the car to a purist without the pukka original matching bumper. Without a non-original bumper, he can sell for £10,000; with the bumper he can sell for £15,000, so the stockist who happens to have it can take a large chunk of the £5,000 uplift.

If you broke the car down into all its components and apportioned the £15,000, the bumper would be worth nowhere near £5,000 of course, more like £150, although he can easily sell it to Mike for £1,000.