If neither buyers nor sellers could distinguish between "lemons" and "cherries" in the used-car market, what would you expect to be the mix of lemons and cherries for sale?
Asymmetry of information - Market for lemons - A risk -neutral consumer is deciding whether to purchase a homogeneous product from one of two firms. One firm produces an unreliable product, and the other a reliable product. At the time of sale, th ...
Risk, Uncertainty and Information - Traders are divided into 2 groups, sellers and buyers. Each seller sells one or no cars, and each buyer buys one or no cars. There are more buyers than sellers and the market is competitive. Cars can ...
Akerlof model - Player 1 first observes the quality (q) of the indivisible good he owns
before proposing a price (p) at which he will sell the good to Player 2,
who responds to the offer by either accepting or reje ...
Supply and Demand - Supply and Demand, Elasticity
1) In the U.S. it is illegal to buy or sell heroin, yet there is still a market. Suppose the government's main goal is to decrease the amount of heroin consumed and pr ...