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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
376
Proof of Proposition6.17: It needs to be shown that (a) this is an equilibrium; (b) it
satisfies the Intuitive Criterion; and (c) in light of the earlier lemmas, no other separating
PBE satisfies the Intuitive Criterion.
With respect to (a): the buyer’s beliefs and strategy are obviously consistent with a PBE.
Consequently, a seller’s expected payment, π, is at most
γ
if
s < s
and at most
¯γ
if
s s
.
A low-quality seller will not wish to deviate:
for all s > s
0
and, by (6.4.23),
for all
s s
. Nor will a high-quality seller:
for all
s < s
, where the second inequality follows from (6.4.14) (i.e., Spence-Mirrlees) ...
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Publisher Resources

ISBN: 9780444536853