Suppose that you are selling your old laptop in the second hand market and you know that if RAM are not overwhelmed, the computer's probability of not breaking down is 95%. The buyer can: -Use the laptop carefully by not downloading too many applications that overwhelm the RAM. In this case the laptop will break down 5% of the times. -Disregard the laptop's memory constraint and overwhelm the RAM. In this case the laptop will break down 50% of the time. To signal the quality of your laptop, you provide a partial insurance that gives the buyer 1500$ towards replacing it with a new laptop, whose cost is 250035. Assume that the buyer likes playing a videogame whose download overwhelms the computer RAM and gains a value of 1000$ if he is able to do so. Will the buyer use the laptop carefully? Why? Yes, because the cost of misusing the laptop for the buyer is $2500* 0.5= $1250. This is above the value of misusing it ($1000) No, because the cost of misusing the laptop for the buyer is $1000* 0.5: $500. This is below the value of misusing it ($1000) Yes, because the cost of misusing the laptop for the buyer is $2500* 0.5: $1250. This is above the value of misusing it ($500) No, because the cost of misusing the laptop for the buyer is $1000. This is above the value of misusing it ($500)