This preview has intentionally blurred sections. Sign up to view the full version.
Unformatted text preview: pay-per view Public goods (fire works, light house) Asymmetric Information:-One side of the market has more information that the other-buyer>seller: health insurance: buyer knows health better than company-seller>buyer: used car: buyer doesn’t know exactly what has happened to the car Wiling to pay: $4000 for plum $2000 for lemon 50/50 chance to get a lemon or a plum: expected value is .5(4000)+.5(2000)=$3000-Adverse selection: the situation that occurs when the less informed part of the market has a larger inferior selection of goods to choose from SP SL 15 5 12 3 3000 2500...
View Full Document
- Spring '08
- Public Good, used car, $2000, $3000, -free rider problem, view non-excludable Commons