1. 2.7 The Application “Adverse Selection and Remanufac tured Goods” reports that, for electronic goods sold on eBay, higher seller feedback scores reduce the price dif ferential between new goods and remanufactured goods.

Explain why this pattern is consistent with the theory of adverse selection. Would you also expect higher seller feedback to reduce the price differential between new goods and used (but not remanufactured) goods?

3. Price Discrimination Due to False Beliefs About Quality