Equation 17 · Part 1 · When Generation Becomes Free, Attention Becomes the Scarce Good

Symbol p^*

p^{*} \;=\; \mathbb{E}\big[\, v(q) \;\big|\; c(q) \le p^{*} \,\big],

p^{*}

What this part means

$p^*$ is part of the quantity the equation computes from the expression on the right.

Its job in the formula

$p^*$ is part of the quantity the equation computes from the expression on the right.

Full expressionSymbol p^*Article meaning

The passage around this formula

Akerlof supplied the canonical model of a market in that condition. Where sellers know quality and buyers do not, buyers can rationally offer only the expected value of what is on offer; sellers whose goods are worth more than that price withdraw; the expected quality of what remains falls; the price falls again. The equilibrium is a fixed point of the form $p^{*} \;=\; \mathbb{E}\big[\, v(q) \;\big|\; c(q) \le p^{*} \,\big]$ . where v(q) is the buyer’s value of quality q and c(q) the seller’s reservation value. Only sellers whose reservation value lies below the prevailing price participate, and the price is the expectation over exactly that self-selected pool [ 2 ] .

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Learn the underlying idea

An exponent tells how a base is used in multiplication. In x³, x is the base and 3 is the exponent: x³ = x × x × x.

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Sources cited in the surrounding passage

[2] The Market for Lemons: Quality Uncertainty and the Market Mechanism ↗

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