Suppose that there is asymmetric information in the market for used cars. Sellers know the quality of the car that they are selling, but buyers do
Suppose that there is asymmetric information in the market for used cars. Sellers know the quality of the car that they are selling, but buyers do not.
Buyers know that there is a 50% chance of getting a “lemon”, a low quality used car. A high quality used car is worth $30,000, and a low quality used car is worth $15,000.
Based on this probability, the most that a buyer would be willing to pay for a used car is $
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