When buyers have private information and sellers charge a single price based on the average cost of buyers, then
A)the mix of buyers will be skewed toward those who are less costly for sellers.
B)the mix of buyers will be skewed toward those who are more costly for sellers.
C)buyers who would be lower-cost buyers will be more likely to buy.
D)buyers who would be higher-cost buyers will be less likely to buy.

Question

Quizplus · Accepted Answer

When sellers charge a single price based on the average cost of buyers, buyers with private information will be incentivized to self-select, meaning that those who are more costly or who value the good more highly will be more likely to buy the good at the same price as those who are less costly or who value the good less highly. Therefore, the mix of buyers will be skewed toward those who are more costly for sellers.

When Buyers Have Private Information and Sellers Charge a Single