Question

Many buyers value high-quality used cars at the full-information market price of p1 and lemons at p2. A limited number of potential sellers value high-quality cars at v1 ≤ p1 and lemons at v2 ≤ p2. Everyone is risk neutral. The share of lemons among all the used cars that might potentially be sold is θ. Under what conditions are all cars sold? When are only lemons sold? Under what, if any, conditions are no cars sold?



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  • CreatedNovember 13, 2014
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