Selection would be significantly smaller. Some percentage of items that are currently getting overwhelmed with fraud would be available safer, sure, but likely at a much higher price (competition lowers prices, after all).
Everyone remembers the time they got a crappy knockoff, or had to filter through fake reviews. But most of the time, people just search for something, buy it, and are satisfied, never having to consider whether it was only fulfilled by Amazon.
At least there is a consistent search/shopping experience, and the refunds are generally instantaneous and there are no questions asked. You can't say that about dealextreme, or alibaba, or dozens of other sites we'd be forced to use if Amazon didn't decide to take on the long tail fo sellers and become responsible for solving the fraud use cases.