SubAquatics (SA) sells scuba diving equipment. Its clients typically read specialist journals and are well informed about the price, reliability, and safety of SA and competitors’ products. SA has estimated that, of 100,000 units sold each year at a price of $100 each, there are 4>(1 – s) fatal accidents due to defective equipment. The […]
Joe was in a bar and saw his friend Sam. Sam had a considerable amount to drink. Sam offered to sell Joe his Porche automobile for only $15,000. Joe made sure to have Sam sign a written agreement to that effect. The next day, Joe went to pick-up the car, but Sam didn’t remember anything […]
The market for digital cameras is relatively new. Ajax Inc. produces what it regards as a high-quality digital camera. Knockoff Inc. produces what it regards as a low-quality digital camera. However, because the market is so new, reputations for quality have not yet developed, and consumers cannot tell the quality difference between an Ajax digital […]
No-State Insurance Company has made the following estimate of auto damage for several groups of potential customers who own cars worth $10,000. There are an equal number of customers in each group. No-State is risk-neutral. State regulation mandates that every customer must pay the same premium regardless of his or her group, and this premium […]
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