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Handbook of the Economics of Risk and Uncertainty
book

Handbook of the Economics of Risk and Uncertainty

by Mark Machina, W. Kip Viscusi
November 2013
Beginner content levelBeginner
896 pages
35h 10m
English
North Holland
Content preview from Handbook of the Economics of Risk and Uncertainty
Benjamin E. Hermalin
272
subject to
For any x, if the buyer’s participation (offer-acceptance) constraint (6.2.1) did not
bind, then the seller could raise t slightly, keeping x fixed, and do better. Hence, in
equilibrium, (6.2.1) must bind. The seller’s choice of x therefore solves
Because (6.2.2) is welfare less a constant, the result follows.
The analysis when the buyer makes the offer is similar and, thus, omitted for the sake
of brevity.
What, in fact, is not general is the conclusion that giving the bargaining power to the
uninformed player (i.e., the seller) leads to inefficiency. To see this, return to the simple
example, maintaining all ...
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Publisher Resources

ISBN: 9780444536853