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18 Private Information Information One common assumption in economic analysis: perfect information … … buyer and seller have the same information
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Asymmetric Information Often, information is imperfect asymmetric SellerBuyer Adverse Selection uninformed buyers are likely to attract lemons Buyer
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Money-Back Guarantees, Warranties, and Independent Quality Ratings Ways for suppliers of plums to identify themselves. warranty Lemon Laws Attempts to protect buyers.
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Moral Hazard actions of one party to a transaction affect costs or benefits of the other party those actions cannot be monitored
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