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Consider the used car market described below. Good Bad Consumer willingness to pay 745 318 Seller willingness to accept 597 226 Known probability 0.25 0.75

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Consider the used car market described below. Good Bad Consumer willingness to pay 745 318 Seller willingness to accept 597 226 Known probability 0.25 0.75 Suppose that the buyer does not know whether a car is good or bad, but the seller does know. How much will bad cars sell for ? (note: assume that there is competition in the market so buyers must pay their willingness to pay (they cannot 'negotiate' lower prices)

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