Assignment on pooling equilibrium

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Pooling Equilibrium. Imagine an economy with no health insurance, public or private, and two types of citizens, frail and robust. Frail individuals are more likely to get sick. A firm decides to enter the market and offer a single health insurance contract, since it is not possible to distinguish between the two types and the firm is not savvy enough to generate a separating equilibrium. After the success, other firms are willing to enter the market. Under which conditions this pooling equilibrium is stable, if any, and why? Fully explain your reasoning.

Reference no: EM133064358

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