Information: Two kids are selling lemonade on each side of suburb street. Felix always sells high-quality hand-made organic lemonade. He sells a
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Information: Two kids are selling lemonade on each side of suburb

street. Felix always sells high-quality hand-made organic lemonade. He sells a bottle for 16$. Felix faces costs 10$. On the other side, George is offering a similar beverage, but he mixes lemon flavor powder with water. He sells this for 4$ a bottle and only faces costs of 2$.



-What price are they willing to pay for lemonade on average?
-What is the profit for George if only Felix offers a guarantee?
-George, as a low quality lemonade seller, thinks that he might crowd out good quality from the market by offering the guarantee. What is the maximum price for such a guarantee such that George always prefers the guarantee irrespective of that Felix will do?
-What could be a solution to the lemonade information problem from the consumers perspective? Please give a short answer.

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