ChAsymmetricInformation(中级微观经济学清华大学,钟笑寒)精讲
Ch03Preferences(中级微观经济学-清华大学,钟笑寒)
Take-home Question
Peter
prefer apple to orange, orange to banana, and banana to apple. (So he is a non-transitive man.) He would like offer 1 dollar to exchange an orange for an apple, a banana for orange, an apple for a banana. What would happen then? Do you think Peter is rational?
Preference Relation
From
, we can derive two other important relations: – strict preference, : x y x y but not y x Read as “x is more preferred than is y”. – Indifference, : x y x y and y x Read as “x is exactly as preferred as is y”.
9
5 5 9
x1
Preferences Exhibiting Satiation
A
bundle strictly preferred to any other is a satiation point or a bliss point. What do indifference curves look like for preferences exhibiting satiation?
x1
Indifference Curves
清华大学中级微观经济学讲义(清华 李稻葵)7
The Strong Axiom of Revealed Preference
A: ($1,$3,$10) (3,1,4). B: ($4,$3,$6) (2,5,3). C: ($1,$1,$5) (4,4,3).
Choice Prices A B C A $46 $39 $24 B $47 $41 $22 C $46 $46 $23
Digression: Science vs. Engineering (对比科学家思维与工程师思维） 找问题与解问题的不同 –要对问题提问题 要对问题提问题 务虚与务实的不同 解释世界与改造世界的不同 –旁观者与参与者的不同 旁观者与参与者的不同
Maintained Assumptions on Preferences
The Strong Axiom of Revealed Preference
Consider the following data: A: (p1,p2,p3) = (1,3,10) & (x1,x2,x3) = (3,1,4) B: (p1,p2,p3) = (4,3,6) & (x1,x2,x3) = (2,5,3) C: (p1,p2,p3) = (1,1,5) & (x1,x2,x3) = (4,4,3)
Recovering Indifference Curves
Suppose we observe: A: (p1,p2) = ($1,$1) & (x1,x2) = (15,15) B: (p1,p2) = ($2,$1) & (x1,x2) = (10,20) C: (p1,p2) = ($1,$2) & (x1,x2) = (20,10) D: (p1,p2) = ($2,$5) & (x1,x2) = (30,12) E: (p1,p2) = ($5,$2) & (x1,x2) = (12,30). Where lies the indifference curve containing the bundle A = (15,15)?
清华大学中级微观经济学讲义清华李稻葵15-文档资料26页
Marginal Revenue and Own-Price Elasticity of Demand
p
a
p (q )ab q
a/2b
a/b q
M R (q ) a 2 b q
Marginal Revenue and Own-Price p Elasticity of Demand
a
M R (q ) a 2 b q
Then Xi = (a-pi)/b and
dX
* i
1.
Therefore,
dpi b
X i * ,p i (a p p ii)/b b 1 a p ip i.
Point Own-Price Elasticity
pi
pi = a - bXi*
X j(p 1 ,p 2 ,m 1 , ,m n ) n x * ji(p 1 ,p 2 ,m i).
i 1
From Individual to Market Demand
Functions
p1
p1
p1’
p1’
p1”
p1”
p1
20
x
* 1
A
15
x
* 1
B
p1’
The “horizontal sum”
The elasticity of variable X with
respect to variable Y is
x,y
%x. %y
Slope Vs. Elasticity
Q: Why not just use the slope of a demand curve to measure the sensitivity of quantity demanded to a change in a commodity’s own price?
Ch12Uncertainty(中级微观经济学-清华大学,钟笑寒)
m L Cna Ca 1 1
slope
mL
1
Where is the most preferred state-contingent consumption plan?
m L Ca
Preferences Under Uncertainty
In
general, how a person values consumption in one state as compared to another will depend on the probability that the state in question will actually occur. Suppose that we are considering two mutually exclusive states. Let c1 and c2 represent consumption in state 1 and 2, and let 1 and 2 be the probabilities that state 1 or 2 actually occurs. Thus 1+2=1. The utility function can be written as U(c1,c2,1,2)
State-Contingent Budget Constraints
m L 1
Cna
m L Cna Ca 1 1
m
The endowment bundle.
mL
m L Ca
State-Contingent Budget Constraints
m L 1
State-Contingent Budget Constraints
清华大学中级微观经济学讲义(清华 李稻葵)30
The Endowment Allocation
2 OB 2 6 4 OA 6 8
ω = (2,2)
B
The Endowment Allocation
2 OB 2 6 4 OA 6 8 The endowment allocation
A ω = (6,4) B
ω = (2,2)
The Endowment Allocation
/ Remarks on the Final
Final Examination: 1. Final exam is comprehensive. 2. It mainly covers the material after midterm. 3. The materials before midterm are important in two ways: 1) some problems may directly come from those chapters. 2) the materials before midterm provide a foundation for new materials. The format of the final will be the same as that in the midterm. Office Hour: 4-5 pm Thursday
Starting an Edgeworth Box
Height = A B ω2 + ω2
= 4+ 2 =6
The dimensions of the box are the quantities available of the goods.
A B ω1 + ω1 = 6 + 2 = 8 Width =
清华经管钟笑寒副教授介绍
清华经管钟笑寒副教授介绍清华经管钟笑寒副教授介绍钟笑寒经济系副教授办公室伟伦楼551个人简介研究成果研究项目钟笑寒，清华大学经济管理学院经济系副主任，副教授。
1994年获清华大学经济管理学院管理信息系统专业工学学士学位，1999年获清华大学经济管理学院数量经济学专业经济学博士学位。
主要讲授课程包括：经济学原理，博弈论，政治经济学。
钟老师的研究领域包括发展经济学，劳动经济学，政治经济学，应用微观经济学，中国经济。
主持过多个重点科研项目，在《经济学季刊》《数量经济技术经济研究》《经济学报》和《中国证券报》等多种刊物和报纸上上发表过二十多篇学术论文。
出版过《文物保护与旅游业发展：一个经济学的分析》《中国农民故事》等著作，并翻“GradualReformorRadicalReform:Sustainable View”,The4thAnnualInternationalConferenceo nTransitionEconomics,Beijing,No.D08.发表论文白重恩、王鑫、钟笑寒，“出口退税政策调整对中国出口影响的实证分析”，《经济学季刊》，第10卷第3期。
乔雪，钟笑寒，“经济发展、危险行为与艾滋病传播”，《南方经济》，2011年第5期。
钟笑寒，“死亡率与产量负相关：煤炭行业‘关井’政策效应分析”，《经济学报》，第5辑。
钟笑寒，“城乡移民与收入不平等：基于基尼系数的理论分析”，《数量经济技术经济研究》，2008年第8期。
冯俊新、张凯云、钟笑寒，“文化遗产资源与区域旅游业发展”，《经济地理》，2008年第3期。
程子建、钟笑寒：“文物保护与旅游产业化：不完全合同理论”，《旅游学刊》，2007年第6期。
钟笑寒，“劳动力流动与工资不平等”，《中国社会科学》，2006年第1期。
钟笑寒，“不确定性、信息与权力：非常规事件下的中央和地方关系”，《经济学报》，第1卷第2辑，2005年12月。
孙睿君，钟笑寒，“运用旅行费用模型估计典型消费者的旅游需求及其收益：对中国的实证研究”，《统计研究》，2005年第12期（总第170期）。
Ch05Choice(中级微观经济学-清华大学,钟笑寒)
y * x1 p1
x1
Examples of Corner Solutions -the Perfect Substitutes Case
So when U(x1,x2) = x1 + x2, the most preferred affordable bundle is (x1*,x2*) where y * * ( x1 , x 2 ) ,0 if p1 < p2 p1 and
y p1
x1
Examples of Corner Solutions -the Perfect Substitutes Case
a1 b dx 2 U/ x1 ax1 x 2 ax 2 MRS . a b 1 dx1 U/ x 2 bx1 bx1 x 2
Computing Ordinary Demands a Cobb-Douglas Example.
So
the MRS is
a1 b dx 2 U/ x1 ax1 x 2 ax 2 MRS . a b 1 dx1 U/ x 2 bx1 bx1 x 2
At
(x1*,x2*), MRS = -p1/p2 so
ax* 2
* bp1 * x2 x1 . ap2
p1 * p2 bx1
(A)
Computing Ordinary Demands a Cobb-Douglas Example.
(x1*,x2*)
also exhausts the budget so
This simplifies to ….
(A) (B)
bp1 * * p1x1 p2 x1 m. ap2
清华大学李稻葵中级微观经济学讲义
The Market --- Appreciating Economic Modeling
The Purpose of this Chapter
• To begin to understand the art of building an economic model • To begin to understand three basic elements of modeling in economics:
– apartments are close or distant, but otherwise identical – distant apartments rents are exo genous (外生变量） and known – many potential renters and landlords
– Purpose – Simplification through assumptions – Value judgment
The Purpose of an Economic Model
• The purpose of an economic model is to help provide precise insights (精确的 洞察力）on a specific economic phenomenon. • Thus:
– Different phenomena needs different model; – Simplification by assumption is necessary
An Illustration: Modeling the Apartment Market
• Purpose: How are apartment rents determined? Are rents “desirable”? • Simplifying assumptions:
Ch10Intertemporal Choice(中级微观经济学-清华大学,钟笑寒)
The Intertemporal Budget Constraint
Only
$m2 will be available in period 2 to pay back $b1 borrowed in period 1. So b1(1 + r ) = m2. That is, b1 = m2 / (1 + r ). So the largest possible period 1 consumption level is
The Intertemporal Budget Constraint
Period
2 income is m2. Savings plus interest from period 1 sum to (1 + r )m1. So total income available in period 2 is m2 + (1 + r )m1. So period 2 consumption expenditure is
Intertemporal Choice
In
this chapter we continue our examination of consumer behavior by considering the choices involved in saving/borrowing and consuming over time. Choices of consumption over time are known as intertemporal choices.
The Intertemporal Choice Problem
The
intertemporal choice problem: Given incomes m1 and m2, and given consumption prices p1 and p2, what is the most preferred intertemporal consumption bundle (c1, c2)? For an answer we need to know: – the intertemporal budget constraint – intertemporal consumption preferences.
清华大学经管学院钟笑寒老师《经济学原理》课件Class_02
第二讲 Class 2
相互依存性和贸易 Interdependence and Trade
想一想你日常生活中某一天： Consider your typical day: 温州制造的闹钟把你吵醒。 You wake up to an alarm clock made in Wenzhou. 给自己倒上一杯用江西的桔子制作的橙汁 You pour yourself some orange juice made from oranges grown in Jiangxi. 你穿上用新疆的棉花制造、在广东工厂缝纫而成的衣服 You put on some clothes made of cotton grown in Xinjiang and sewn in factories in Guangdong.
9
张顺与李逵的生产可能性 The Production Opportunities of Zhang Shun and Li Kui
生产一斤的时间（小时）：
张顺 李逵
鱼 0.8小时 1.6小时
柴 0.32小时 0.16小时
一天（ 8小时）的产量（斤）： 鱼 柴 10斤 25斤 5斤 50斤
10
自给自足 Self-Suffiuction Possibilities Frontiers
柴（斤）
(a)张顺的生产可能性边界 Zhang Shun’s Production Possibilities Frontier
25 12.5 0 A
5
10
鱼（斤）
12
生产可能性边界 Production Possibilities Frontiers
清华大学中级微观经济学(清华 李稻葵 助教等)
/portalweb/appmanager/portal/semTSINGHUA UNIVERSITYSCHOOL OF ECONOMICS AND MANAGEMENT中级微观经济学2004年秋季学期Intermediate MicroeconomicsFall Semester 2004星期三Wednesday9:50 am —12:15pm六教 6A018任课教师:清华大学经济管理学院教授李稻葵Professor David D. Li助教:姜超, 冯俊新，江红平，梅松课程网页Course Web-Page:→分类讨论→中级微观经济学用户名: s311 密码：pe4028联系方式:李稻葵E-mail: lidk@电话: 6277-2126;办公室: 舜德楼南211H答疑时间: 预约姜超S972260@ 冯俊新fengjx@江宏平jianghp@ 梅松meis@习题课以及答疑时间: 星期一 & 星期二Monday & Tuesday19:00 pm —21:00 pm伟伦楼北5081.课程简介微观经济学是现代经济学的基础. 其核心理论体系之完美, 可以和物理学的牛顿力学相媲美; 其主要研究方法广泛应用于经济学的各个分支; 其思维方式,渗透了现代社会科学的主要学科. 本课程的目的就是给学生打下一个扎实的微观经济学基础, 欣赏其理论之完美和独特的思维方式, 并熟练地掌握微观经济学系统的分析工具.2.教学风格本课程属于经济学核心课程, 力求与国际最高标准接轨. 教学的文字材料(包括教材, 讲稿, 习题和考试等), 以英文为主; 口头表达以汉语为主.3.教材教材为:Hal R. Varian: Intermediate Microeconomics A Modern Approach. Sixth Edition W.W. Norton & Company. New York, NY. 2003.习题来自其附本:Theodore C. Bergstrom and Hal R. Varian: Workouts in Intermediate Microeconomics. Sixth Edition W.W. Norton & Company. New York, NY. 2003.4.习题课对大多数同学而言, 参加习题课是学好本课程的关键. 习题课上还会布置随堂习题, 成绩计入总成绩. 如果有的同学感到可以比较轻松地完全掌握教学内容, 可以选择不参加少量习题课和部分随堂习题, 不会影响总成绩, 总成绩地计算办法见下.除第一周和国庆节长周末之外, 每周将安排两节内容相同但时间不同的习题课, 大家可以任选其一参加. 具体时间另行通知.5.课程要求及考核标准微观经济学的特点是思想性与方法性并重, 要学好这门课, 学生们一定要下功夫彻底理解基本概念和基本原理, 不仅懂, 而且会讲,会用, 然后练习解题. 解题时要举一反三, 多动脑筋总结经验.根据微观经济学的这些特点, 本课程采取以下考核方式:1)随堂习题 (比重 20%) : 在习题课上进行. 题目来自Theodore C.Bergstrom and Hal R. Varian: Workouts in Intermediate MicroeconomicsSixth Edition W.W. Norton & Company. New York, NY. 2003.随堂习题的目的是鼓励学生在课下做习题, 多练习.随堂习题的总成绩是每人8个最高的随堂习题的平均值.2)期中考试 (比重 30%): 题目也将与上述习题集有关.3)期末考试 (比重 50%): 按清华大学的给定时间进行.Class ScheduleNote:Chapters refer to Hal R. Varian: Intermediate Microeconomics AModern Approach. Sixth Edition W.W. Norton & Company. New York, NY. 2003.September 15 Introduction and Overview of the CourseChapter 1 The MarketChapter 2 Budget ConstraintSeptember 22 Chapter 3 PreferencesChapter 4 UtilityChapter 5 ChoiceSeptember 29 Chapter 6 DemandChapter 7 Revealed PreferenceOctober 6 (No Class --- National Day Long Weekend)October 13Chapter 8 Slutsky EquationChapter 9 Buying and sellingOctober 20 Chapter 10 Intertemporal ChoiceChapter 11 Asset MarketsChapter 12 UncertaintyChapter 13 Risky AssetsOctober 27 Chapter 14 Consumer’s SurplusChapter 15 Market DemandChapter 16 EquilibriumNovember 3 Mid-Term ExamNovember 10Chapter 18 TechnologyChapter 19 Profit MaximizationChapter 20 Cost MinimizationNovember 17Chapter 21 Cost CurvesChapter 22 Firm SupplyChapter 23 Industry Supply November 24Chapter 24 MonopolyChapter 25 Monopoly BehaviorChapter 26 Factor Markets December 1 Chapter 27 OligopolyChapter 28 Game Theory December 8 Chapter 30 ExchangeChapter 31 ProductionDecember 15 Chapter 32 WelfareChapter 33 ExternalitiesChapter 35 Public Goods December 22 Chapter 36 Asymmetric InformationChapter 17 AuctionsDecember 29 Course Integration任课教师简介李稻葵(David D. Li) 1985年毕业于清华大学经济管理学院管理信息系统专业,同年由学院推荐参加国家教委组织的留美经济学考试(即, 邹至庄经济学留学计划),出国留学. 1985到1986,为美国哈佛大学国际发展研究所(HIID)访问学者. 1986年入该校经济系攻读博士, 从师艾里克马斯金,安德烈史莱法,以及亚诺什科尔耐, 主修经济理论,公司金融, 和比较经济学. 1992年获哈佛大学哲学博士(经济学)学位. 1992至1999任美国安娜堡密西根大学经济系助理教授并兼任该校中国研究中心研究员. 1997至1998, 从密西根大学请假,任美国斯坦福大学胡佛研究所国家研究员,从事中国经济改革的制度变迁研究. 1999至2004年长期聘为香港科技大学经济系副教授,并任该校经济发展研究中心副主任.李稻葵曾兼任世界银行中国社会保障体制改革研究项目顾问 (1989), 国际<<比较经济学杂志>> (Journal of Comparative Economics)编委 (2000-03), 中国留美经济学会(CES)会长 (2001-02), 清华大学经济管理学院特聘教授(2002-03). 现兼任(欧洲)经济政策研究中心(CEPR), 美国密西根大学威廉戴维森研究所 (The William Davidson Institute)研究员; 国际《经济学通報》(Economics Bulletin),中国<<经济研究>>,香港《中国评论》(The China Review)等学术杂志的编委; 国际比较经济研究会执行理事; 南开大学,四川大学,西南财经大学兼职教授。
ChAsymmetricInformation(中级微观经济学清华大学,钟笑寒)精讲
Equilibrium: The Example
p
2400 2000
Quality supply curve
Where are the equilibrium price and quality?
1200 1000 0
Quality demand curve q
q0=1/2
1
Equilibrium: The Example
*Equilibrium
An
equilibrium in such a goods market with unobservable qualities is a price level, p* and a set Q* of seller qualities/types who sell goods, such that The types of sellers (Q*) are rational to remain selling, given this price level. The price level is a rational expectations on the part of the buyers, given the types of sellers.
Adverse Selection
Hence
the lemons “crowd out” the peaches from the market. Gains-to-trade are reduced since no peaches are traded. The presence of the lemons inflicts an external cost on peach owners. We say adverse selection arises when only owners of relatively bad goods are willing to accept a buyer’s offer at any given price.
清华大学中级微观经济学讲义清华李稻葵(1)
Chapter Fifteen
Market Demand
What Is the Purpose of This Chapter?
• We aggregate individual demand and form a market demand function. • We study a property of the market demand function
From Individual to Market Demand Functions
• Think of an economy containing n consumers, denoted by i = 1, … ,n. • Consumer i’s ordinary demand function for commodity j is
x*1A xB1
An Important Concept: Elasticity
• Elasticity measures the “sensitivity” of one variable with respect to another.
• The elasticity of variable X with respect to variable Y is
dp
dp
X*(p)1
p X*(p)
dX* dp
X*(p)1 .
Revenue and Own-Price Elasticity of Demand
dR dp
X* (p)1
so if 1 then
dR 0 dp
and a change to price does not alter sellers’ revenue.
清华大学中级微观经济学讲义(清华 李稻葵)11-16页精选文档
Arbitrage
The price today of an asset is p0. Its price tomorrow will be p1. Should it be sold now?
The rate-of-return from holding the
asset is I.e.
R p1 p0 p0
( 1 R ) p 0 ( 1 r ) p 0 .
I.e. if the rate-or-return to holding the
asset Rr the interest rate, then
keep the asset.
And if Rr then ( 1 R ) p 0 ( 1 r lly asset values are uncertain. Incorporating uncertainty is difficult at this stage so we will instead study assets assuming that we can see the future with perfect certainty.
Assets with Consumption Returns
The example of house A=appreciation T=implicit rental rate P=initial investment h=(T+A)/P=total rate of return h=(T+A)/P=r
Ch27Oligopoly(中级微观经济学-清华大学,钟笑寒)
Bertrand Games
Suppose
one firm sets its price higher than another firm’s price. Then the higher-priced firm would have no customers. Hence, at an equilibrium, all firms must set the same price.
Price Competition
Games
in which firms use only price strategies and play simultaneously are Bertrand games.
Bertrand Games
Each
firm’s marginal production cost is constant at c. All firms simultaneously set their prices. Q: Is there a Nash equilibrium? A: Yes. Exactly one. All firms set their prices equal to the marginal cost c. Why?
Choosing a Strategy
Sequential
games – Quantity leader vs. quantity follower (Stackelberg model) – Price leader vs. price follower Simultaneous Games – Simultaneous quantity setting (Cournot model) – Simultaneous Price Setting (Bertrand competition) Collude – cooperative games
中级微观经济学
中级微观经济学《中级微观经济学》是一门研究经济系统中不同个体之间的协调，以及政府、实体和社会如何管理经济行为的学科。
这门学科涵盖了国际贸易、货币经济学、国家经济学、行为经济学、资源分配和公共经济学等领域。
这门学科的目的是帮助人们洞察经济世界的结构、原理和定律，使他们能够更好地改善自身的状况和财政状况。
本文将着重介绍下中级微观经济学的基本内容，以及它对掌控和改善经济的作用。
首先，中级微观经济学包括供求分析、收入分配、国家经济学、货币经济学和行为经济学。
供求分析旨在理解供给和需求之间的关系，以及供给和需求之间的变化如何影响市场价格。
收入分配研究不同经济主体之间的收入分配模式，以及如何创造更加有效的收入分配方式。
国家经济学是关于政府如何通过预算、税收和各种政策工具来调节经济活动的学科；货币经济学研究货币的流通及它对经济活动的影响；行为经济学讨论不同经济主体在制定政策和决策时如何考虑价值和效率。
此外，中级微观经济学还提出了一系列经济政策工具以及解释它们如何在经济体系中起作用的理论模型。
这些工具包括财政政策、货币政策、贸易政策和监管政策。
此外，中级微观经济学还结合实证研究来研究不同市场结构下的经济行为，分析如何实现有效的监管、降低交易成本和提高生产率。
最后，中级微观经济学为政府和公民提供了工具，用于管理经济活动并实现财政政策目标。
这些工具可以帮助政府准确地分析经济趋势，使其更好地设计和实施经济政策。
这也可以帮助企业和个人更好地理解经济环境，制定更有效的经济策略。
同时，微观经济学也有助于提高公民的经济能力，帮助他们更好地提高自身的经济财务状况。
总之，中级微观经济学是理解和掌控经济活动的重要学科，它提供了一些理论工具和政策工具，帮助政府和企业更好地管理和改善经济状况。
通过学习中级微观经济学，人们不仅可以更好地理解经济，也可以更好地利用经济学获得财务自由。
中级微观经济-Chapter37_Asymmetric Information
租金合同
雇主应该确定的租金费R为多少？ 该雇主应该在不影响工人不参加工作的 前提下尽可能多得提出收益，因此 R 应 该满足 s( f (e*)) c(e*) R u~; 也即 R s( f (e*)) c(e*) u~.
其它激励合同
(ii) 工资合同: 一个支付给工人工资的合 同为：s(e) we K .
3
因此假如超过三分之一的车为次货，那么 市场中将仅有次货交易。
逆向选择
在一个市场中如果达到均衡状态时，两 种车都在交易且买主不能区分这两种车 ，这样的均衡称为混合均衡。 在一个市场中，如果只有一种车被交易 ，且买主能够辨别两种车，这样的均衡 称为分离均衡。
质量选择
每个卖主可以选择其产品的质量和价值。 两把伞; 一把质量高，一把质量低。 哪一种将会被制造与销售？
发送信号
劳动市场上有两种工作者；高能力与低能 力。 高能力工作者的边际产品为aH。 低能力工作者的边际产品为aL。 aL < aH。
发送信号
高能力工作者的比例为h。
低能力工作者的比例为1 - h 。
发送信号
每个工作者的工资由其预期边际产品来决 定。 假如厂商知道每个工作者的类型，他们将 给高能力工作者支付wH = aH 给低能力工作者支付wL = aL。
将 s( f (e))代入可得
max p f (e) c(e) u~.
雇主利润最大化时有
f (e) c(e).
激励
f (e) c(e) e e * .
能够使雇主利润最大化的合同依赖于工人的 努力水平e*，该努力水平使得工人的边际努 力成本等于雇主从工人努力中所得的边际收益。
激励
f (e) c(e) e e * . 能够使雇主利润最大化的合同依赖于工人的 努力水平e*，该努力水平使得工人的边际努 力成本等于雇主从工人努力中所得的边际收益。
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EV $1200*(1/ 2) $2400(1/ 2) $1800.
Adverse Selection
But
a peach seller cannot negotiate a price below $2000 and will exit the market. So all buyers know that remaining sellers own lemons only. Buyers will pay at most $1200 and only lemons are sold.
Adverse Selection
Hence
the lemons “crowd out” the peaches from the market. Gains-to-trade are reduced since no peaches are traded. The presence of the lemons inflicts an external cost on peach owners. We say adverse selection arises when only owners of relatively bad goods are willing to accept a buyer’s offer at any given price.
*Take-home Question
In
what ways can asymmetric information affect the functioning of a market? Four applications will be considered: adverse selection moral hazard signaling incentives contracting.
Asymmetric Information in Markets
Imperfectly
informed markets with one side better informed than the other are markets with asymmetric information.
Asymmetric Information in Markets
Adverse Selection
Suppose
no buyer can tell a peach from a lemon before buying. What is the most a buyer will pay for any car?
Aection
If
every buyer can tell a peach from a lemon, then lemons sell for between $1,000 and $1,200, and peaches sell for between $2,000 and $2,400. Gains-to-trade are generated when buyers are well informed.
Asymmetric Information in Markets
A
doctor knows more about medical services than does the buyer. An insurance buyer knows more about his riskiness than does the seller. A used car’s owner knows more about it than does a potential buyer.
Chapter Thirty-Six
Asymmetric Information
Information in Competitive Markets
In
purely competitive markets all agents are fully informed about traded commodities and other aspects of the market. What about markets for medical services, or insurance, or used cars?
Adverse Selection
Consider
a used car market. 100 people want to sell their used cars and 100 want to buy a used car. Everyone knows 50 of the cars are “lemons” and 50 are “peaches”. The current owner of each car knows its quality, but the prospective buyers don’t know and given car’s quality. Each lemon seller will accept $1,000; a buyer will pay at most $1,200. Each peach seller will accept $2,000; a buyer will pay at most $2,400.
this case, the buyers have to guess about how much each car is worth. Since a car is equally likely to be a peach as a lemon, then a buyer would be willing to pay the expected value of the car, i.e,