Consider a used car market where buyers cannot observe the car's true quality until after purchase but sellers know the car's true quality. There are four possible car types in the used car market - junky, poor, satisfactory, and good - and buyers know the distribution of car types even though they cannot observe the quality of the car owned by each individual seller. Use the table below to answer the following questions. Car's Quality Junky Poor Satisfactory Good Proportion of cars 0.2 0.3 0.4 0.1 Buyer's Value Of Car $300 $800 $5,000 $10,000 Seller's Reservation Value of Car $50 $200 $2,000 $8,000 Bayesian Nash equilibrium does exist where only junky, poor, and satisfactory cars are sold. That
Consider a used car market where buyers cannot observe the car's true quality until after purchase but sellers know the car's true quality. There are four possible car types in the used car market - junky, poor, satisfactory, and good - and buyers know the distribution of car types even though they cannot observe the quality of the car owned by each individual seller. Use the table below to answer the following questions. Car's Quality Junky Poor Satisfactory Good Proportion of cars 0.2 0.3 0.4 0.1 Buyer's Value Of Car $300 $800 $5,000 $10,000 Seller's Reservation Value of Car $50 $200 $2,000 $8,000 Bayesian Nash equilibrium does exist where only junky, poor, and satisfactory cars are sold. That
Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter16: Information, Risk, And Insurance
Section: Chapter Questions
Problem 20CTQ: A website offers a place for people to buy and sell emeralds, but information about emeralds can be...
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