Suppose that buyers in the used electric washer market are willing to pay $100 for a high-quality electric washer and $50 for a low-quality electric washer.If buyers believe that 70% of all used electric washer are low-quality,what is the maximum price they would be willing to pay for a used electric washer?

Question

Quizplus · Accepted Answer

Buyers expect 70% low-quality and 30% high-quality washers. The expected value is 0.7*$50 + 0.3*$100 = $65.

Suppose That Buyers in the Used Electric Washer Market Are