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

Given that buyers are willing to pay $100 for high-quality washer and $50 for the low-quality one. If buyers believe that 70% of all used electric washer are low-quality, then the expected value of the washer is:
($100 x 30%) + ($50 x 70%) = $30 + $35 = $65
Therefore, the maximum price buyers are willing to pay for a used electric washer is $65.

Suppose That Buyers in the Used Electric Washer Market Are