[1]: Let us work through a numerical example of the asymmetric information insurance model discussed in class. I could not make this work with nice numbers - so this will require some numerical equation solving. You can use any software you are familiar with for that (and google will also solve equations). The important part are the equations, not the precise numbers. So let us keep it to 2 decimal places. There are two strictly risk averse expected utility maximizing consumers who have iden- tical 'Bernoulli' utility for consumption, which is given by u(c) = c. Both consumers have an identical wealth endowment of $1, and face an identical loss of $0.5. However, they differ in their probability of the loss occurring. The good type has a probability of loss of 0.1. The bad type has a probability of loss of 0.4. Suppose half the consumers are bad type. We will suppose a competitive insurance market(s) (zero expected profits.)