Bill sees a classified ad offering a used DVD player for $5. On the opposite pag

Question

Bill sees a classified ad offering a used DVD player for $5. On the opposite page, he sees a big color ad from a national electronics chain offering new DVD players for $50. Bill values a DVD player at $75 so long as it works, regardless of whether it is new or used. 5.2. Suppose that the seller of the DVD player, Al, was honest. He had a DVD player, and then his parents gave him a new one for his birthday, so rather than throw the old one away, he tried to find it a new home and make a few dollars. What should Al have done to sell it successfully? A. He should have asked $45 to show that it was a good deal. B. He should have asked $20 and sold it with a guarantee that he would replace it with a new DVD player if it turned out not to work. C. He should have offered the DVD player for free to anyone who would take it. D. He should have posted a picture of the DVD player along with his ad, to make it look more attractive.

Explanation / Answer

B)He should have asked $20 and sold it with a guarantee that he would replace it with a new DVD player if it turned out not to work. This is best opportunity for both sides of the deal. buyer receives switch-on warranty and seller receives profit, thus surplus for both will be maximized.

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