Can such a policy be sustained

Reference no: EM132137891

Question: 1. Consider the Rothschild-Stiglitz adverse selection model that we discussed in the class. Suppose a competitive insurance company proposes an insurance policy that provides full insurance to all individuals, regardless of their risk types. Can such a policy be sustained as a Rothschild-Stiglitz equilibrium? Answer the question using a diagram. Diagram(horizontal axis :high risk type H, vertical axis : low risk type L)

Reference no: EM132137891

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