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Business, 26.11.2019 04:31 ggbvalde

Consider the market for lemons game we played in class on thursday november 7. in that game, the sellerâs valuation of a car, v, is uniformly distributed between $0 and $1. the buyerâs value for the same car is 1.5v. in the class game, sellers chose an ask price, and then buyers decided whether to buy. here we consider a different version of this game. suppose now that buyers make the first move by choosing an amount b to bid for the car. b must be between $0 and $15000. the seller than decides whether to accept or reject the bid. the sellerâs valuation v is again assumed to be uniformly distributed from $0 to $1. the seller knows the valuation exactly while the buyer only knows the distribution. solve for a perfect bayesian equilibrium, and the value of b in this equilibrium.

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