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
Luke and Manny’s class is having a yard sale to benefit UNICEF, but Jay hates when people haggle. Even though the ash tray is marked at 50 cents, he is unwilling to accept a lower payment from a man who clearly can afford the full ticket price. The man, on the other hand, believes the original price is too high and tries to extract some consumer surplus. Exchange needs to be mutually beneficial in order to occur, but sometimes that doesn’t happen.
See more: consumer surplus, exchange, negotiation, prices, producer surplus, reservation price, transactions, willingness to buy, willingness to sell