Luke and Manny’s class is having a yard sale to benefit UNICEF, but Jay hates when people haggle. In this scene, some guy had gone into Jay’s house, and then tries to buy his toaster. He’s not sure of the quality of the toaster and isn’t willing to commit to purchasing the toaster unless Jay can prove that it works. In markets with asymmetric information, one party of the transaction has more information about the quality of the product compared to the other party. This makes the market for used goods unique from new goods. It turns out, though, that the toaster was never for sale.
See more: asymmetric information, exchange, insurance, market for lemons, used goods, willingness to buy, willingness to sell
Phil decides to steal (what he believes to be) Luke’s bike to teach him a lesson about leaving his property lying around town unsupervised. In the process of helping a neighbor who locked herself out of her house, Phil loses the bike because he didn’t lock it before walking away. Phil returns to the bike shop in the hopes of explaining his situation and getting another bike for Luke, but the employee won’t give him a new bike because Phil didn’t buy the insurance before. Phil believed that insurance was for “suckers” but risk averse people may prefer the added cost in exchange for peace of mind.
See more: insurance, risk aversion, unintended consequences