16.8 Diagrams with three types Suppose the agent can be one of three types rather than just two as in the chapter.

a.

Return to the monopolist’s problem of computing the optimal nonlinear price. Represent the irst best in a schematic diagram by modifying Figure 16.4. Do the same for the second best by modifying Figure 16.6.

b.

Return to the monopolist’s problem of designing optimal insurance policies. Represent the irst best in a schematic diagram by modifying Figure 16.7. Do the same for the second best by modifying Figure 16.8.