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