Asymmetric Information

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Asymmetric Information
Its a slam dunk, Boss
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You have a chance to bid on some colored plastic
chips. The chips are drawn one at a time from a
barrel with equal numbers of red and blue chips
and replaced after they are drawn. You can bid
on the chips as they are drawn, but you dont get
to look at the chip before you bid. You can sell
the blue chips for 10 each. Red chips are
worthless. You dont get to look at the chips
before you bid. If you did this 1000 times,
what is the most that you could bid per chip and
expect on average not to lose money?
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You have a chance to bid on some colored plastic
chips. Chips are drawn one at a time from a
barrel with equal numbers of red and blue chips
and replaced after each draw. Blue chips are
worth 10 each. Red chips are worth 0. You
dont get to look at the chips before you bid. A
competing bidder does get to look. He will bid
6 for each blue chip and 0 for a reds. Each
chip is sold to the high bidder. If you bid 4
per chip, you will A) certainly make a
profit.B) make a profit on average but might
lose money.C) make a loss on average but might
profit.D) certainly lose money.
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You have a chance to bid on some colored plastic
chips. Chips are drawn one at a time from a
barrel with equal numbers of red and blue chips
and replaced after each draw. Blue chips are
worth 10 each. Red chips are worth 0. You
dont get to look at the chips before you bid. A
competing bidder does get to look. He will bid
6 for each blue chip and 0 for a reds. If you
had to enter this auction 1000 times and make the
same bid every time, what is the most that you
would be willing to bid for a chip?
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Announcements

• Class will not meet on Friday, March 16.
• If your last name begins with B or V , take
  your final exam in Chemistry 1171. All others
  take it here. You must bring a photo ID.
• Homework 12 this week. Not to be turned in.
• Dont forget to take psychological tests on
• class website.

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And on to our lecture