Competitive insurance market

(a) Symmetric information. Suppose insurance companies can perfectly observe the types of insurance consumers. i. ii iii. iv. vi. vii. Using the numerical values provided for a, 2, mg, and erg, write down the zeroprot condition for providing insurance to type H consumers specifying y as a function of 3:. Find the values for a: and 3; that a type H consumer will receive from an insurance contract in the competitive insurance market. Show your work. Find the values for c and f that a type H consumer will receive from an insurance contract in the competitive insurance market. Show your work. Using the numerical values provided for a, z, rrL, and g, write down the zero-prot condition for providing insurance to type L consumers Specifying y as a function of :3. Find the values for :o and 3; that a type L consumer will receive from an insurance contract in the competitive insurance market. Show your work. Find the values for c and 3" that a type L consumer will receive from an insurance contract in the competitive insurance market. Show your work. Construct a well-labeled diagram with a; on the horizontal axis and g on the vertical that graphically shows how the equilibrium values of 3: and y are determined for both types of consumers. 1. Competitive insurance market. Consumers in a competitive insurance market receive utility from wealth given by: U('w) = log(1 + w) (1] Wealth is random and consumers without insurance will receive either a. units of wealth in the bad state of the world or 2 units of wealth in the good state. There are two types of insurance consumers: highrisk (type H) and low-risk (type L). For highrisk consumers, the bad state occurs with probability am and for low-risk consumers, the probability of the bad state is FL where in,