Purchase homogeneous product from one of two firms

Assignment Help Business Economics

Reference no: EM131246967

A risk-neutral consumer is deciding whether to purchase a homogeneous product from one of two firms. One firm produces an unreliable product and the other a reliable product. At the time of the sale, the consumer is unable to distinguish between the two firms’ products. From the consumer’s perspective, there is an equal chance that a given firm’s product is reliable or unreliable. The maximum amount this consumer will pay for an unreliable product is $0, while she will pay $70 for a reliable product. a. Given this uncertainty, what is the most this consumer will pay to purchase one unit of this product? $ b. How much will this consumer be willing to pay for the product if the firm offering the reliable product includes a warranty that will protect the consumer? $

Reference no: EM131246967

Questions Cloud

Discuss the difference between outer and inner controls : How are personnel security and personnel integrity integral in the protection of an organization's human assets (employees and clients)? Be sure to include a discussion about a code of ethics and ethical standards.

Clientele consists of two types of investors : Pelican Point Financial Group’s clientele consists of two types of investors. The first type of investor makes many transactions in a given year and has a net worth of over $1.5 million. These investors seek unlimited access to investment consultants..

What are the dilemmas of the new medical technology : Suppose you borrowed and bought a house few years ago, but the interest has fallen due to the monetary policy since then. Explain how the low interest can benefit you. What are the dilemmas of the new medical technology ?

Information security within organizations : Information security within organizations has evolved and has become much more complex. In a written paper, answer the following questions:

Purchase homogeneous product from one of two firms : A risk-neutral consumer is deciding whether to purchase a homogeneous product from one of two firms. One firm produces an unreliable product and the other a reliable product. At the time of the sale, the consumer is unable to distinguish between the ..

Emulate controller to remotely control the helicopter flying : COMP9032 Project Description: In this project, you will be working individually to develop a system, using the AVR Development board, to emulate a controller to remotely control the helicopter flying in a big building hall. The floor area of the h..

What kind of promise should the president make : Given your answer to part (b), what is the outcome of the game? (What is the superintendent's offer and what is the president's response?) Comment on how the union's final salary depends on y.

Examine the proposed business ethical problem : Evaluate the quality of the Brazilian Federal Data Processing Service's proposed architecture plan geared toward solving the security problem. Suggest two (2) other possible architecture solutions that the Brazilian Federal Data Processing Service..

The circular flow model with government : The Circular Flow Model with Government is another important model for students to understand. a. Please explain what the model shows us. List and explain the assumptions of the model. i. There are 3 assumptions of the Circular Flow Model with Govern..

User Account

All Pages