18.10 Diagrams with three types Suppose the agent can be one of three types rather than just two as in the chapter.

a. Return to the monopolist’s problem of computing the optimal nonlinear price. Represent the first best in a schematic diagram by modifying Figure 18.4. Do the same for the second best by modifying Figure 18.6.

b. Return to the monopolist’s problem of designing optimal insurance policies. Represent the first best in a schematic diagram by modifying Figure 18.7. Do the same for the second best by modifying Figure 18.8.