(a) A seller owns one unit of a good, which she values at c. (The value c can be thought of as…
(a) A seller owns one unit of a good, which she values at c. (The value c can be thought of as the quality of the good) A buyer may buy the unit
(b) Replicate the exchange economy of question a, but in such a way that each seller has private information that is relevant to a single buyer instead of to all buyers. Suppose that there are many duplexes (a continuum of them) In each duplex, there is one inhabitant on the first floor, who owns a smoke alarm, and one inhabitant on the second floor, who owns none. Second-floor residents have higher valuations (v) than first-floor residents.
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