Consider a buyer and seller of a used car. The quality of the car (denoted as s) is known to the seller but not to the buyer. The net utility of the buyer is U = Bs - p² if he buys the car at a price p, where ß> 0 is his valuation parameter. If he does not buy the car, his utility is zero. The seller's utility is p if she sells the car at a price p. If she does not sell the car, her utility is as. Assume that the buyer does not know s, but his subjective distribution of s, is given by a uniform distribution over the interval [0, 10]. Which of the following statements is correct? (a) the buyer always wants to buy if the seller wants to sell (b) if the seller wants to sell, the buyer does not want to buy (c) if the seller wants to sell, the buyer will only buy if p < (d) if the seller wants to sell, the buyer will only buy if for p <1

Consider a buyer and seller of a used car. The quality of the car (denoted as s) is known to the seller but not to the buyer. The net utility of the buyer is U = Bs - p² if he buys the car at a price p, where ß> 0 is his valuation parameter. If he does not buy the car, his utility is zero. The seller's utility is p if she sells the car at a price p. If she does not sell the car, her utility is as. Assume that the buyer does not know s, but his subjective distribution of s, is given by a uniform distribution over the interval [0, 10]. Which of the following statements is correct? (a) the buyer always wants to buy if the seller wants to sell (b) if the seller wants to sell, the buyer does not want to buy (c) if the seller wants to sell, the buyer will only buy if p < (d) if the seller wants to sell, the buyer will only buy if for p <1

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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