1. (25) The Blue Razor/ Pink Razor Puzzle. Even thogh identical in all aspects, except color, pink razors are sold at higher prices than blue razors. Using the search-theoretic model of price dispersion of Burdett and Judd (1983), we want to provide a possible explanation for this puzzling phenomenon. Consider a market populated by a measure 1,/2 of women and a measure 1/2 of men. Each woman has a unit demand for a pink razor, and gets utility u,, p from purchasing it at the price p. Each man has a unit demand for a blue razor, and gets utility u,,, p from purchasing it at the price p. Each seller has the technology to produce any kind of razor at the unit cost . Buyers can only shop from a small number of sellers on a given day. A female buyer can shop from 1 randomly-selected seller with probability a1 = (0, 1} and from 2 randomly-selected sellers with probability a2 =1 a1 A male buyer can shop from 1 randomly-selected seller with probability a1 (0.1) and from 2 randomly-selected sellers with probability o, 2 =1 a,, 1. o . Write down the equilibrium distribution of posted prices F,,(p) for pink razors. Why are sellers indifferent between posting different prices on the support of F,7 b. Write down the equilibrium distribution of transaction prices G, (p) for pink razors. Explain the formula. c. What is the sign of the difference between F,, and &7 Explain. = . Suppose that women have a higher opportunity cost of spending time shopping than men and, hence, v, 1 = @, 1 and a2