Can you please help me with below home work question : Three qualities of second-hand cars (High, Medium and Low) are available for sale in Amsterdam. Suppose the three qualities are supplied in equal proportions and there are more buyers than sellers. Sellers know the quality of the car they are selling and only sell if their valuation is met. Buyers cannot identify the quality of cars, but know that sellers have this private information. The valuations of Buyers and Sellers for each quality of car are as given in below table : Quality Buyer's Value Seller's Value High £ 3000 £2500 Medium £ 1700 £ 1500 Low £ 400 £ 500 a. What is the efficient outcome in this market ? b. Show that only low-quality cars are sold in the market and find the equilibrium price.
Can you please help me with below home work question :
Three qualities of second-hand cars (High, Medium and Low) are available for sale in Amsterdam. Suppose the three qualities are supplied in equal proportions and there are more buyers than sellers. Sellers know the quality of the car they are selling and only sell if their valuation is met. Buyers cannot identify the quality of cars, but know that sellers have this private information. The valuations of Buyers and Sellers for each quality of car are as given in below table :
| Quality | Buyer's Value | Seller's Value |
| High | £ 3000 | £2500 |
| Medium | £ 1700 | £ 1500 |
| Low | £ 400 | £ 500 |
a. What is the efficient outcome in this market ?
b. Show that only low-quality cars are sold in the market and find the
Note : Give short answer with all necessary steps, I will give upvote to correct answer.
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 2 images
