Alice wants to buy a security from Bob. To Alice, the security is worth £x>0, in state G and 0 in state B. To Bob, the security is worth £z>0 in state G and 0 in state B, with zz
Alice wants to buy a security from Bob. To Alice, the security is worth £x>0, in state G and 0 in state B. To Bob, the security is worth £z>0 in state G and 0 in state B, with z<x. Bob always perfectly knows the state of the world. For Alice there are two cases: she can be informed or uninformed. When informed, Alice also knows the state. When uninformed, she assigns a 50% chance to each state, G and B. Both Alice and Bob know whether Alice is informed or not. Assume also that whenever Alice and Bob choose to trade, they must trade at a price p = (x+z)/2. Which one of the following is false?
1）Alice is always better off when she is informed
2）Bob is always better off when Alice is informed
3）If Alice is uninformed, trade never occurs
4）If Alice is informed, trade occurs only if x/2>z
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