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Consider the Rothschild-Stiglitz model of insurance with adverse selection and two unobservable types, high-risk, and low-risk, with loss probabilities H > L respectively. Illustrate and

Consider the Rothschild-Stiglitz model of insurance with adverse selection and two unobservable types, high-risk, and low-risk, with loss probabilities H > L respectively. Illustrate and discuss in a figure, the separating equilibrium that might exist.

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