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Consider a market for used cars. There are two types of cars: good and bad. Good cars are worth $10,000 to buyers and $5,000 to
Consider a market for used cars. There are two types of cars: "good" and "bad". Good cars are worth $10,000 to buyers and $5,000 to sellers, while bad cars are worth $6,000 to buyers and $4,000 to sellers. Fraction p of all cars are good. Assume that each seller knows the type of their own car, but that the buyers cannot observe the type of any car. All agents are risk-neutral and have quasilinear utility. a) [8] Describe the Pareto efficient allocation of cars. Is it achievable? If so, state the range(s) of the relevant price(s). If not, justify your
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