Business, 30.03.2021 01:00, dalton200166

Suppose that there are two types of houses for sale: those with solid foundations and those with cracked foundations. In all other respects, the two types of houses are identical. Houses with solid foundations are worth $200,000, while those with cracked foundations are worth $200,000 minus the $20,000 to fix the crack, or $180,000. Sellers know which type of house they have, but buyers cannot detect whether the foundation has a crack. Suppose that 80 percent of the houses for sale have a solid foundation and 20 percent of the houses for sale have a cracked foundation. How could the owner of a house with a solid foundation credibly signal to potential buyers that the house has a solid foundation

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Suppose that there are two types of houses for sale: those with solid foundations and those with cra...