Question: 22.4 Assume again the basic set-up from exercise 22.1. A. We will now investigate the role of firm screens as opposed to consumer signals. a.

22.4 Assume again the basic set-up from exercise 22.1.

A. We will now investigate the role of firm screens as opposed to consumer signals.

a. Suppose that an insurance company can screen students. More precisely, suppose an insurance company can, for a fee of

c, obtain a student’s transcript and thus know what type a student is.

If insurance companies will only sell insurance of type i to students who have been screened as type i, what would be the equilibrium insurance premium for each insurance assuming perfect competition (and no recurring fixed costs)?

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