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4. Asymmetric Information with Costly Verication: Consider the Market for Lemons model from class, where the quality is uniformly distributed on [0,1], the 1value to
4. Asymmetric Information with Costly Verication: Consider the Market for Lemons model from class, where the quality is uniformly distributed on [0,1], the 1value to the buyer is 1.5:; and the 1value for sellers is q. Suppose that, at a cost H) the seller can have the quality of the car revealed to buyers [e.g. a is the cost of a trustworthy mechanic providing a detailed report proving the quality is q). Suppose all the bargaining power is on the seller's side, so the price if a good is sold is 1.5 times its expected quality. (a) For which level of H does there exist an equilibrium in which no cars are sold? (b) For H? below the level you found in (a) determine which q are sold in equilibrium. ((3) What happens in the market as :1; goes to 0
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