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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
314
(although, again, the techniques and insights developed here have wider applicability). As
in that earlier section, the contract offer is made on a take-it-or-leave-it (TIOLI) basis.
As before, call the informed party’s information her type. Denote it by γ and assume
it is an element of
Ŵ
. Let
G : Ŵ →[0, 1]
be the distribution function by which “Nature”
chooses γ. While γ is the informed party’s (here, seller’s) private information,
Ŵ
and G(·)
are common knowledge.
6.4.1 The Lemons Model
The classic informed-seller model is Akerlof’s (1970) “lemons model”: the seller’s type
(i.e., γ) describes the quality of the good or ...
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Publisher Resources

ISBN: 9780444536853