Consider a market for product X where 75 percent of the stores charge $500 and 25 percent charge $450.Compute the expected benefit from an additional search when the first search results in a price of $500.

Question

Quizplus · Accepted Answer

The expected benefit from an additional search is calculated by considering the probability of finding a lower price and the difference in prices. The probability of finding the lower price ($450) is 25%, and the price difference is $50 ($500 - $450). Thus, the expected benefit is 0.25 * $50 = $12.50.

Consider a Market for Product X Where 75 Percent of the Stores