Asked by Melina Collins on Jun 29, 2024
Verified
Lexus has recently begun a program in which a used Lexus automobile which passes a 100 point inspection is designated by the local dealer to be a Lexus Certified Pre-owned Vehicle.Would local Lexus dealers find it in their best interest to participate? Explain.
Certified Pre-owned
A designation for used items, particularly vehicles, that have been inspected, refurbished, and certified by a manufacturer or other certifying authority, offering a warranty beyond standard used goods.
Lexus Dealers
Specific authorized sellers and service providers for Lexus brand vehicles.
- Understand the ways in which various mechanisms, including signaling and screening, can alleviate the issues associated with adverse selection.
- Determine approaches to mitigate disparities in information within marketplaces.
Verified Answer
KG
Kevin GallagherJun 30, 2024
Final Answer :
Yes.If the certification is credible to car buyers, they will be willing to pay more for cars which pass the inspection.As long as this premium exceeds dealer costs, this breaks the adverse selection problem.
Learning Objectives
- Understand the ways in which various mechanisms, including signaling and screening, can alleviate the issues associated with adverse selection.
- Determine approaches to mitigate disparities in information within marketplaces.
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