00:01
Hello students, we are given a question.
00:02
Gary was a student of college, college students, and recently he just got a job and he wants to buy a car.
00:09
Okay, we need to find the answers of a and b part.
00:12
First part is how could gary use market signals, reputation and standardization to make comparison.
00:17
So first of all, we will go with the first part.
00:21
We are supposed to know that and we can go with that point that gary's first choice must be clear with that.
00:30
Fact that whether he wants to buy a used car or a new car okay and suppose first of all we will simultaneously write the concept here gary's choice must be clear must be clear in choosing of car in choosing between the new or used car okay students now suppose gary buys a used car then if then gary must choose between a professional used car dealer and an individual car dealer or can be said a seller okay we will write simultaneously suppose if gary chooses a used car an used car then he must choose between an individual seller okay because the used car can be owned by an individual seller or an or a professional used car dealer professional used car dealer used car dealer okay okay, students.
02:18
Now, and we can go with the further point that if in each of those three points, of these, those three types of seller, okay, first one is new car dealer, oh sorry, new car option, and the second one is for individual seller and the third one can be professional used car dealer.
02:39
Okay, so there are three types of dealers here, sellers, okay, and all of them uses different market signals to convey quality information about their car okay or can be said as even as can be said as product so basically we can write here all of them uses different different market signals to maintain or can we said as convey maintain the quality quality of their product of their cars now we will come to the announcement another point, suppose if we go with the new car dealer who works with the manufacturer, okay? he can offer the standard and the extended warranties that guarantee the car will perform as advertised.
03:46
Okay, students? because we can see that the few cars use, few used car carry a manufacturing warranty and the used car dealer never intimate familiar with the condition of that car okay because of a lot of issues of maintenance and the quality as well and the long long productivity as well so we can write here that a new car dealer new car dealer who works with the manufacturer directly with the manufacturer facturer may offer standard and extended extended and as well as standard warranties that may guarantee that the car will perform as advertised okay that make surety that make a surety that the car will perform as an advertised okay now because we already know that few few used car carry a manufacturing warranty and the used car dealer is are not intimately familiar with the condition of their cars because of their long productivity and the maintenance and the quality as well now we can go with the second point further when if we choose the used car dealer so we can write here the used car dealer used car dealer must rely on the reputation particularly on the reputation which offers as good values okay because since the individual seller never offers warranties nor relies because individual don't take any type of commitment for their product as well so we can say one line as well here the used card dealers must rely on reputation of offering best values.
06:42
Okay, students? because we already know that individual seller neither never offers individual sellers never offers foreign parties nor and never offers.
07:07
Relies on the purchasing capacity and purchasing from the particular seller and the reputation as well and the productivity of that product now thus we can say the further line that because of due to the lack of the highly highly lack of the information gary must gather as much information as he can about those terms like market signal reputation and standardization as much as he can afford okay so we can say that gary must need to gather as much as possible as much as possible information information for all those all markets signals market signals and reputation and standardization as well standardization as well okay now as much as he can as much as he can afford and possible now we'll go with the third part sorry b part which is asked that now we are a bank manager and we need to decide we need to have to decide whether the information is useful or not for gary in gary's case okay see the bank the main problem of the bank is that he does bank bank never bank do not know about the gary's potential in order to pay the loan back.
08:59
So it is also an asymmetric information...