(b) Sam is in the market for a used motorbike. At a used bike shop, Sam...
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(b) Sam is in the market for a used motorbike. At a used bike shop, Sam roughly knows that the price of a used motorbike is between $40,000 and $48,000. If Sam believes that the dealer knows as much about the bikes as him, how much do you think that Sam is willing to pay? Explain. Assume that he only cares about the expected value of the bike he buys and that the bike values are symmetrically distributed. (c) Sam now decides to go to a different town to search for a used motorbike and believes that the dealer knows more about the used motorbikes than him. How much do you think that Sam is willing to pay? Explain your answer. How can this be resolved in a competitive market? (b) Sam is in the market for a used motorbike. At a used bike shop, Sam roughly knows that the price of a used motorbike is between $40,000 and $48,000. If Sam believes that the dealer knows as much about the bikes as him, how much do you think that Sam is willing to pay? Explain. Assume that he only cares about the expected value of the bike he buys and that the bike values are symmetrically distributed. (c) Sam now decides to go to a different town to search for a used motorbike and believes that the dealer knows more about the used motorbikes than him. How much do you think that Sam is willing to pay? Explain your answer. How can this be resolved in a competitive market?
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Part B If the value of bikes are symmetrically distribute then in that case Sam will be willing ... View the full answer
Related Book For
Introduction to Probability and Statistics
ISBN: 978-1133103752
14th edition
Authors: William Mendenhall, Robert Beaver, Barbara Beaver
Posted Date:
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