Vertical Flashcards
1
Q
what is the difference between horizontal and vertical differentation
A
horizontal- some people like the product if its new, indifferent to quality
vertical - people want new things always, prefer quality if price is the same
2
Q
if a>b in quality where would A’s consumer lie in reference to the critical consumer
A
(xhat,1)
3
Q
where does quality indifference become more elastic
A
as we get nearer to 1.
3
Q
A
3
Q
What is adverse selection and what is a moral hazard
A
adverse selection- quality and types are unobservable and unverifyable
moral hazard - actions are unobservable and unverifiable
