Question: B. Now consider again whether we can find analogous conclusions in the model from Section B as modified in exercise 22.7. a. Interpreting the model
B. Now consider again whether we can find analogous conclusions in the model from Section B as modified in exercise 22.7.
a. Interpreting the model as in exercise 22.7, illustrate the separating equilibrium in a graph with the insurance benefit b on the horizontal axis and the insurance premium p on the vertical.
Include in your graph a zero-profit pooling contract line that makes the separation of types an equilibrium outcome.
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