What are the answers to Solved Problem 19.1 if customers are willing to pay ($ 10,000) for
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What are the answers to Solved Problem 19.1 if customers are willing to pay \(\$ 10,000\) for a good used car?
Data From Solved Problem 19.1:-
Suppose that everyone in our used car example is risk neutral, and potential car buyers value lemons at \(\$ 4,000\) and good used cars at \(\$ 8,000\). The reservation price of lemon owners is \(\$ 3,000\) and the reservation price of owners of high-quality used cars is \(\$ 7,000\). The share of current owners who have lemons is \(\theta\) (in our previous example, the share was \(\theta=\frac{1}{2}\) ). For what values of \(\theta\) do all potential sellers sell their used cars? Describe the equilibrium.
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