Answer Happy

150, 75. Call u a car seller's value of a given car. Suppose everyone knows that of all cars have v = of all cars have v = 300, and of all cars have v = 900. Buyers value a car of quality v at u (v) = v. Suppose, as in class, the seller knows the quality of their car, while the buyer does not. (a) Suppose an auctioneer calls out a price greater than $900, will any cars be sold? Think first about which cars the seller would be willing to sell, use this to form the buyer's expectations about the quality of the car, and then see if the buyer is willing to buy. (b) Suppose an auctioneer calls out a price between $300 and $900, will any cars be sold? Use the same reasoning as in above. (c) Suppose an auctioneer calls out a price between $150 and $300, will any cars be sold? Use the same reasoning as in above. (d) Combining your answers above, which types of cars can possibly be sold in this market?