The classical guitar market is limited in the sense that as you go up the quality pyramid, you start to have less supply and very narrow demand. There seems to be some limitations in sourcing a quality instrument in the $1500 - $2500 price range adequate for an advanced amateur/student in the US. (Yes I know you can purchase on the used market, but I am speaking about new guitars here). There is also limitation in doing face-to-face tryouts of instruments without traveling some distances for some of us. Even here in Chicago we are limited to Brune, so there is a bit of lack of competition locally (sorry folks S. Brenner isn't a legitimate dealer). Because of the lack of physical dealers in a particular geographic area, the next step is to start having instruments sent back and forth which I have done in the past from some very excellent dealers in the US, but that starts to become expensive (something like $200 per instrument to ship back and forth if it does not work out). I do agree that CG dealers provide a service, however we typically do not benefit from the competition which would occur if there were more than one brick and mortar dealer say within the same 90 mile radius of each other. The physical dealer positioned in one market then gets a benefit of being the only game in town, thereby inflating prices. (Side note: I have become to believe in trying to source a guitar from as close to the maker as possible due to these limitations with dealers, dealer markup and physical distance which makes shipping-to-tryout compulsory. Most recently I have acquired a Navarro Garcia from Memorial Music which I have been quite pleased with.) (Another side note: I have also researched buying direct from makers in Spain, especially when the USD to EUR was favorable to us in the US several months ago. There are some options here such as Lisa Hurlong in Granada for example who acts as what I might call a "broker" or "representative" to many of the makers in Granada. My point is dealers serve a purpose, however the limitations of distance reduces competition which drives up prices in my opinion. For example the price of a decent Granada made guitar direct is something like EUR 3000, but by the time it gets to the states with tariffs and dealer markup, we are looking at $6000 for the same instrument. Similarly, buying a Picado from a dealer in the US is something like $2000 for a mid grade model, with the same instrument priced at EUR 1045 from a dealer like Casa Luthier.)
The limitations of a smaller market (both buyers and availability of upper mid-grade instruments), limits to brick and mortar dealers, I believe causes prices to be inflated here in the U.S. Also the lack of reasonably price builders operating in the US also creates limitations. I also hate to say this, but these limitations of the narrow market also create a certain degree of snobishness and "exclusivity" in the classical guitar market with some (but not all) dealers. Some of the positives I do see are the US based builders/distributors that are worth looking into, such as Hippner, GVR, Cervantes. Cordoba (AKA GSI) appears to be similar to what Martin or Taylor are in the steel string acoustic market, which is also promising to some degree. Again even with the makers mentioned in the previous sentence, there is nowhere to try these out physically without paying for freight charges or making a pilgrimage to the Classical Guitar Store, Savage Guitars, Savino, Kirkpatrick, Reverie, Johnathan Marshall, Guitars Int or Guitar Salon for example. For now the market is what it is. On the used market, I am encouraged by the Delcamp for sale board and the increasing use of Reverb for classical guitar buying and selling. Reverb especially has democratized the selling of musical instruments and taken away the exorbitant e - b a y fees.