In its 2017 report on the second-hand economy, Kijiji estimated the value of used goods sales in

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In its 2017 report on the second-hand economy, Kijiji estimated the value of used goods sales in Canada to be about \(\mathrm{C} \$ 29\) billion (or \(1.4 \%\) of GDP). Most exchanged goods fall into the category of used clothing, shoes, and accessories. Suppose that buyers of good-quality used dresses value them at \(\mathrm{C} \$ 80\) but value lemons at \(\mathrm{C} \$ 30\). The reservation price of owners of good-quality used dresses is \(\mathrm{C} \$ 70\) and of owners of lemons is \(\mathrm{C} \$ 20\). If the share of lemons among used dresses is \(\delta\) and everyone is risk neutral, under what conditions do all dresses sell? When do only lemons sell? Under what conditions (if any) do no dresses sell?

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Microeconomics

ISBN: 9781292215624

8th Global Edition

Authors: Jeffrey Perloff

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