policy or mechanism could solve any informational imbalances

Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter10: Introduction To Simulation Modeling
Section10.4: Simulation With Built-in Excel Tools
Problem 12P: In August of the current year, a car dealer is trying to determine how many cars of the next model...
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Suppose the equilibrium price for good quality used cars is $20,000. And the equilibrium price for poor quality used cars is $10,000. Assume a potential used car buyer has imperfect information as to the condition of any given used car. Assume this potential buyer believes the probability a given used car is good quality is .60 and the probability a given used car is low quality is .40. Assume the seller has perfect information on all cars in inventory.

What policy or mechanism could solve any informational imbalances and restore the market to an efficient allocation of used cars?

a. Third-party provided information on the history of the car (ex: maintenance records, accident records, verified millage and verify repairs).
b. Legal remedies and laws restricting fraudulent sales of used cars.
c. Obtainablepublications discussing quality, price and possible repairs of all cars --used and new.
d. All of the above.
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ISBN:
9781337406659
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Cengage,