Question

A seller of an indivisible object faces n potential buyers with independent valuations. The seller's own valuation is 0 . The seller knows that each buyer's valuation is v H with probability p H and v L

Answer 1

Imperfect information in the market makes it challenging for buyers and sellers to agree on a price.

Step-by-step explanation:

When there is imperfect information in the market, it becomes difficult for a buyer and seller to agree on a price. This is because both parties may have different information or lack complete knowledge about the quality or value of the product being bought or sold. For example, a buyer may not know the true value of an item and may offer a lower price, while the seller may overestimate the value and demand a higher price. This information asymmetry can lead to disagreement and difficulty in reaching a mutually acceptable price.