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Consider an economy with two agents where agent A and B both have the same risk attitude given by v(x) = ln x. Suppose in
Consider an economy with two agents where agent A and B both have
the same risk attitude given by v(x) = ln x. Suppose in state 1, only agent A has a
job that earns 3 and B does not earn anything. In state B, only B works and earns
2. Solve for the equilibrium in this economy when mutual insurance is feasible and
both states can occur with equal probability.
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