4. Asymmetric Information with Costly Verification: Consider the Market for Lemons model from class, where the quality is uniformly distributed on [0, 1], the value to the buyer is 1.59 and the value for sellers is q. Suppose that, at a cost k the seller can have the quality of the car revealed to buyers (e.g. k 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 k does there exist an equilibrium in which no cars are sold? (b) For k below the level you found in (a) determine which q are sold in equilibrium. (c) What happens in the market as k goes to 0? 4. Asymmetric Information with Costly Verification: Consider the Market for Lemons model from class, where the quality is uniformly distributed on [0, 1], the value to the buyer is 1.59 and the value for sellers is q. Suppose that, at a cost k the seller can have the quality of the car revealed to buyers (e.g. k 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 k does there exist an equilibrium in which no cars are sold? (b) For k below the level you found in (a) determine which q are sold in equilibrium. (c) What happens in the market as k goes to 0