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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
Uncertainty and Imperfect Information in Markets
347
which implies
ˆq
(0)
=
q
: if the buyer never learns, then the seller will cheat him by pro-
viding minimal quality. Finally, observe
The rightmost term is positive for T=1. For
T 2
, the rightmost term is the difference
between the slope of the chord between (δ, δ
T
) and (1, 1
T
) and the derivative of δ
T
at δ.
Because the power function is a convex function for powers greater than 1, the slope of
the chord must exceed the derivative; that is, the rightmost term is positive. It follows,
therefore, that R/∂λ> 0, which in turn entails that the quicker the buyer is at learning
true quality, the greater ...
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Publisher Resources

ISBN: 9780444536853