Which of the following do Smith and his collaborators argue is generally true of posted offer markets?
A) Prices will tend to be higher than the market equilibrium price due to tacit collusion and signalling on the part of the sellers.
B) Prices will converge smoothly to the equilibrium price as long as the magnitudes of the consumer and producer surplus are approximately equal.
C) Prices will converge smoothly to the equilibrium price as long as the magnitude of the consumer surplus exceeds the magnitude of the producer surplus.
D) Prices will converge smoothly to the equilibrium price as long as the magnitude of the consumer surplus is smaller than the magnitude of the producer surplus.

Question

Quizplus · Accepted Answer

Smith and his collaborators argue that in posted offer markets, prices tend to be higher than the market equilibrium price due to tacit collusion and signalling among sellers. This behavior can prevent prices from falling to the equilibrium level where supply equals demand, as sellers aim to maintain higher profit margins.

Which of the Following Do Smith and His Collaborators Argue