What is the efficient outcome in this market? Equivalently, which types of bikes should changetheir owners to maximise the social welfare? Three qualities of second-hand bicycles are available in equal numbers: high, medium, and low. There aremany buyers and sellers, who value each quality of the bike differently. The value that each agent assignsto each quality of the bike is given below.Quality Buyer's value Seller's valueHighMedium100756560Low3045

Individual preferences are typically assumed in welfare economics, and efforts are made to improve…

Answered: What is the efficient outcome in this…

What is the efficient outcome in this market? Equivalently, which types of bikes should change their owners to maximise the social welfare?

Economics Today and Tomorrow, Student Edition

1st Edition

ISBN:9780078747663

Author:McGraw-Hill

Publisher:McGraw-Hill

Chapter5: Buying The Necessities

Section5.2: Cloting Choices

Problem 1R

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Question

What is the efficient outcome in this market? Equivalently, which types of bikes should change
their owners to maximise the social welfare?

Three qualities of second-hand bicycles are available in equal numbers: high, medium, and low. There are
many buyers and sellers, who value each quality of the bike differently. The value that each agent assigns
to each quality of the bike is given below.
Quality Buyer's value Seller's value
High
Medium
100
75
65
60
Low
30
45

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