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Published equation contexts

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

Why this formula appears here

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∗  =  E[ v(q)  ∣  c(q)≤p∗ ]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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Published contexts (1)

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

Equation 17 · Institutions & Economy

When Generation Becomes Free, Attention Becomes the Scarce Good

This equation states a bound: one expression must stay on the indicated side of the other under the article’s assumptions.

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∗  =  E[ v(q)  ∣  c(q)≤p∗ ]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 ] .

Meanings in this article

  • E\mathbb{E}: The expected value operator: the probability-weighted average of the quantity inside its brackets.
  • vv: the buyer’s value of quality q and c(q) the seller’s reservation value.
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