Warranties in the used car market ________ the problem of private information thereby causing the price of good and bad used cars to ________.
A) reduce; be the same
B) reduce; differ
C) magnify; be the same
D) magnify; differ

Question

Quizplus · Accepted Answer

Warranties help reduce the problem of private information (asymmetric information) by signaling the quality of the car, allowing prices of good and bad used cars to differ.

Warranties in the Used Car Market ________ the Problem of Private