Considering a used car market seller 10,000 2000 buyer 12,000 1000 A Good Car A lemon 1. Under perfect information ( buyer and seller both know the true condition and value of the car ) What is the expected profit for a good car seller if he successfully sold one car? What is the expected profit for a lemon seller? 2. Under asymmetric information ( buyer only knows their own evaluation for the car, and there are 50% chance for them to end up with a lemon ) What is the reservation price for the buyer? What is the expected profit for a good car seller if he successfully sold one car? What is the expected profit for a lemon seller? 3. Under asymmetric information, what will eventually happen to this used car market?

Principles Of Marketing
17th Edition
ISBN:9780134492513
Author:Kotler, Philip, Armstrong, Gary (gary M.)
Publisher:Kotler, Philip, Armstrong, Gary (gary M.)
Chapter1: Marketing: Creating Customer Value And Engagement
Section: Chapter Questions
Problem 1.1DQ
icon
Related questions
Question

7

QUESTION 1
Considering a used car market
seller
buyer
12,000
1000
A Good Car
10,000
2000
A lemon
1. Under perfect information ( buyer and seller both know the true condition and value of the car )
What is the expected profit for a good car seller if he successfully sold one car?
What is the expected profit for a lemon seller?
2. Under asymmetric information ( buyer only knows their own evaluation for the car, and there are 50% chance for them to end up with a
lemon )
What is the reservation price for the buyer?
What is the expected profit for a good car seller if he successfully sold one car?
What is the expected profit for a lemon seller?
3. Under asymmetric information, what will eventually happen to this used car market?
OUEST ION ?
Transcribed Image Text:QUESTION 1 Considering a used car market seller buyer 12,000 1000 A Good Car 10,000 2000 A lemon 1. Under perfect information ( buyer and seller both know the true condition and value of the car ) What is the expected profit for a good car seller if he successfully sold one car? What is the expected profit for a lemon seller? 2. Under asymmetric information ( buyer only knows their own evaluation for the car, and there are 50% chance for them to end up with a lemon ) What is the reservation price for the buyer? What is the expected profit for a good car seller if he successfully sold one car? What is the expected profit for a lemon seller? 3. Under asymmetric information, what will eventually happen to this used car market? OUEST ION ?
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps

Blurred answer
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Principles Of Marketing
Principles Of Marketing
Marketing
ISBN:
9780134492513
Author:
Kotler, Philip, Armstrong, Gary (gary M.)
Publisher:
Pearson Higher Education,
Marketing
Marketing
Marketing
ISBN:
9781259924040
Author:
Roger A. Kerin, Steven W. Hartley
Publisher:
McGraw-Hill Education
Foundations of Business (MindTap Course List)
Foundations of Business (MindTap Course List)
Marketing
ISBN:
9781337386920
Author:
William M. Pride, Robert J. Hughes, Jack R. Kapoor
Publisher:
Cengage Learning
Marketing: An Introduction (13th Edition)
Marketing: An Introduction (13th Edition)
Marketing
ISBN:
9780134149530
Author:
Gary Armstrong, Philip Kotler
Publisher:
PEARSON
MKTG 12:STUDENT ED.-TEXT
MKTG 12:STUDENT ED.-TEXT
Marketing
ISBN:
9781337407595
Author:
Lamb
Publisher:
Cengage
Contemporary Marketing
Contemporary Marketing
Marketing
ISBN:
9780357033777
Author:
Louis E. Boone, David L. Kurtz
Publisher:
Cengage Learning