Suppose you found a used car you want to purchase. You ask the dealer if, for an additional payment, he would provide a one- year warranty. The dealer refused, so you go to another dealer. This one is willing to sell a suitable car with a warrantee. You decide to purchase the car but not the warranty. Is it true that if all customers behave like you did, used car dealers would have to raise the price of their warranties to signal quality?

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The Answer of Suppose you found a used car you want to purchase. You ask the dealer if, for an additional payment, he would provide a one- year warranty. The dealer refused, so you go to another dealer. This one is willing to sell a suitable car with a warrantee. You decide to purchase the car but not the warranty. Is it true that if all customers behave like you did, used car dealers would have to raise the price of their warranties to signal quality?

Suppose You Found a Used Car You Want to Purchase