suppose that there are two types of houses for sale: those with solid foundations and those with cracked foundations. in all other respects, the two types of houses are identical. houses with solid foundations are worth $200,000, while those with cracked foundations are worth $200,000 minus the $20,000 to fix the crack, or $180,000. sellers know which type of house they have, but buyers cannot detect whether the foundation has a crack. suppose that 80 percent of the houses for sale have a solid foundation and 20 percent of the houses for sale have a cracked foundation. how could the owner of a house with a solid foundation credibly signal to potential buyers that the house has a solid foundation?
