Flea markets

Lessons for economists from flea markets.

One of the local sports round Perpignan, where we’ve just bought a house, is going to village flea-markets on Sundays. They don’t go in for car boots: trestle stalls are rented cheaply by the organising villages, so the atmosphere is pleasant, even for a reluctant shopper like me. This is Latour-bas-Elne. On a given Sunday, there are half-a-dozen such dos.

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How do flea markets by amateurs match up against the idealised markets of Walras and Arrow? There are no real barriers to entry – the stall space goes for €5 or so, barely enough to cover the cleanup. The goods are all different, though similar within a category (vases, chamber pots, old vinyl records). The prices are arbitrarily set by the vendor, and possibly haggled. There are no equilibrium prices, unless you relax the concept so that every sale is an equilibrium by definition. The market does not clear: much, possibly the majority, of the stock is unsold at the end of the day, and either goes to the next flea market or is junked.

At a first glance, the activity does not make sense as a way of making a living. The minimum wage in France is €9.6 an hour, the average €14. A typical stallholder has to put in €100 worth of work before she starts earning. Most vendors are there because it’s fun, and are not pricing their time. Subjectively, the stuff in Granny’s attic isn’t worth anything, and selling it is getting something for nothing. The shoppers are not driven by necessity either. Some just like shopping, others are looking for a bargain, or a specific gewgaw like a horse brass. The lack of pressure on either side – in contrast to the Moroccan souk – makes the experience relaxed.

It prompts some questions for economists. The flea-market is inconsequential, but it is a real market; and it does not look very like the textbooks. A revolutionary suggestion to the profession: go and observe some actual markets. Their differences from the textbook models might be illuminating, no? A few suggested questions to get started.

What are the subjective costs and benefits of trading? People vary a lot here. I basically dislike the activity of shopping – looking round to see what’s available for sale – and Lu enjoys it. Similarly some (I suspect far fewer) enjoy haggling, and more dislike it. This won’t matter much if the variations are random. But this is unlikely. We all shop as consumers because we must, like it or not. Vendors choose the profession, and are far more likely to enjoy the activity.

CLERKS SHOUT ORDERS FROM FEDERAL FUNDS FUTURES PIT IN CHICAGO Take it to high-pressure markets like open-outcry commodities markets, and the only people who can stand the work are psychological outliers, quite unrepresentative of the general population. And they think of their strange work as the norm, and proselytise for its extension.

In a typical retail market, vendors who enjoy the work meet buyers many of whom do not. (In a wholesale one, they will be the same sort of people). I suggest that this asymmetry systematically works to the disadvantage of consumers like me. We take the second decent deal rather than spend another two hours finding the best one. The constraint on vendors in fixed-offer markets rather than haggling ones is the minority of keen price-sensitive shoppers. Luxury shops can ignore them completely, Walmart and Carrefour have to keep them coming, hence the special offers. So real markets generate a vendors’ rent from consumer distaste, and often a price spread from haggling. How big is the effect? In some markets like hotel rooms, probably large.

Another general problem needing data is market clearing. Financial markets clear by definition, as they are about assets and somebody ends up with them at day’s end. In markets for goods and services, non-clearing is the norm. Airlines have managed, by heroic feats of computer-aided price discrimination, to raise load factors so that every flight is efficiently and unpleasantly crowded. African trader2 But hotel rooms and restaurant tables stay vacant, buses travel half-empty, unsold food is given away to food banks by supermarkets, and unsold TVs from last year’s line end up in Kinshasa. One of the big economic stories of the last decade must be how better information on the Internet and mobile phones has improved the clearing rate of many markets all over the world. But since the markets were assumed to be efficient before, you would never guess the scale of this improvement.

Author: James Wimberley

James Wimberley (b. 1946, an Englishman raised in the Channel Islands. three adult children) is a former career international bureaucrat with the Council of Europe in Strasbourg. His main achievements there were the Lisbon Convention on recognition of qualifications and the Kosovo law on school education. He retired in 2006 to a little white house in Andalucia, His first wife Patricia Morris died in 2009 after a long illness. He remarried in 2011. to the former Brazilian TV actress Lu Mendonça. The cat overlords are now three. I suppose I've been invited to join real scholars on the list because my skills, acquired in a decade of technical assistance work in eastern Europe, include being able to ask faux-naïf questions like the exotic Persians and Chinese of eighteenth-century philosophical fiction. So I'm quite comfortable in the role of country-cousin blogger with a European perspective. The other specialised skill I learnt was making toasts with a moral in the course of drunken Caucasian banquets. I'm open to expenses-paid offers to retell Noah the great Armenian and Columbus, the orange, and university reform in Georgia. James Wimberley's occasional publications on the web

6 thoughts on “Flea markets”

  1. I'm not sure most people who sell retail goods for a living enjoy it. It may be the best work they can get given their qualifications.

    1. To defeat my argument, you have to show that the distribution of likers and haters is the same on both sides of the transaction. Doesn't seem at all probable to me. Checkout cashiers and shelf-fillers aren't salespeople. Surely employers seek out workers for sales jobs who have a talent or liking for it? And the army of self-employed shopkeepers are to a considerable extent there by choice.

  2. Asking economists as a class to observe and draw inferences from actual markets is like asking theologians to become sociologists: it's not what they're there for (and I admire theologians as learned and subtle people).

    From my observation, there are at least three kinds of people selling at flea markets: traders (the ones selling DVDs or cheap sunglasses), who have one or two lines of goods, a set round and who see it as a job; the people who are turning clutter into money and who often sell very cheaply, as the object is not so much to gain money as to clear space; and the people who need money to pay for something for which only money will do. You find the same sorts elsewhere – there are shops as hobbies, shops there to make a living and shops whose aim is to turn something into money specifically. The latter are often a little desperate (peasants rightly distrust the market, because money brings with it a complex of power they are ill-positioned to resist; so too the widow selling biscuits and tea by the roadside in India, because only rupees will pay the rent).

  3. Negotiation takes place in some nominally "fixed offer" markets – I did so just yesterday buying auto parts from a Ford dealer. The parts salesman quoted me a price, I asked for a discount and immediately received a 20+% discount on an $85 part. While the discount was also off a price list (jobber cost rather than direct consumer cost) it did require me asking for it.

    1. The extreme cases are upscale hotel rooms and private university tuition. The quoted rate is the one paid by Saudi princelings. Though I've not heard that you can ever get into the Four Seasons for free, as is possible at Harvard for the maximally desirable candidate (say a brilliant Afro-and Native-American orphaned woman with a Paralympic gold medal in swimming).

  4. Many a time, businessmen established pop-up outlets in looking centres as a way to attract shoppers for new items. This is usually a popular location for just a pop-up retail store as this can be a high targeted visitors area.ebaycoupons

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