When Lemons Are Better Than Lemonade: The Case Against Mandatory Used Car Warranties

Markets in which secondhand goods are traded perform a variety of important economic functions. For example, the markets for financial assets provide liquidity for traders, allowing corporations to maintain viable sources of investment capital. Because houses are very durable while individuals' tastes and preferences for location and style change, local real estate markets allow for spatial reallocation of households. Antique markets provide avenues for investors and collectors to share risks and allocate the consumption of "master" works.

Flea markets, garage sales, and swap meets give individuals the opportunity to sell items in excess supply to people with an excess demand for the same. In all of these cases, efficiency is enhanced by transferring ownership of assets from lower valued uses to higher valued ones.