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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
353
As noted, the buyer must be given incentives to invest and the seller incentives not
to overcharge. These conditions are, respectively, equivalent to
87
Taking the limit as δ 1, (6.5.20) and (6.5.21) imply
By definition (6.5.22) holds—indeed is a strict inequality—if
ˆ
I = I
. By continuity, it
follows that if the parties are sufficiently patient (δ is large enough), then an equilibrium
of the repeated game exists in which the buyer invests. Observe, critically, that such an
equilibrium requires that the seller not capture all the surplus—she must leave the buyer
with some.
88
6.5.4 Semi-Cooper ...
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Publisher Resources

ISBN: 9780444536853