Question: 18.6 Consider the same setup as in Problem 18.5, but assume that insurance is offered by competitive insurers. a. Ignore the issue of whether consumers

18.6 Consider the same setup as in Problem 18.5, but assume that insurance is offered by competitive insurers.

a. Ignore the issue of whether consumers’ insurance decisions are rational for now and simply assume that the equal numbers of lefties and righties both purchase full insurance whatever the price. If insurance companies cannot distinguish between consumer types and thus offer a single full-insurance contract, what would the actuarially fair premium for this contract be?

b. Which types will buy insurance at the premium calculated in (a)?

c. Given your results from part (b), will the insurance premiums be correctly computed?

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