December 13 - pay-per view Public goods (fire works, light...

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Public goods: Properties: Non-rival- one person’s consumption of the good does not affect another person’s ability to use the good Non-excludable- once the good is produced, it is difficult to prevent anyone from using it -public good is non-rival and non-exclusive Excludable non-excludable Rival Non-rival -Free rider problem: everyone would like for someone else to pay for the good -Drop in the bucket problem: if one person fails to contribute to the production of the good, it will not prevent the good from being produced Private good (cheese burger) Commons goods (fishing hole, grazing land) Concert,
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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 doesnt 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...
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This note was uploaded on 04/01/2008 for the course ECON 002 taught by Professor Mcleod,markpehlivan,ayseozg during the Fall '08 term at Pennsylvania State University, University Park.

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December 13 - pay-per view Public goods (fire works, light...

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