dam's convertible is worth $100,000. But Adam is careless and leaves the top down and the keys in the ignition (perhaps, not a safe practice even in a small Vermont town). Consequently his car will be stolen with probability of 0.5. If it is stolen, Adam will never get it back. He has $100,000 in other wealth and his von Neumann-Morgenstern utility function is u(cb, cg ) = 0.5 ln(cb) 0.5 ln(cg ), where cb is consumption in the bad state (when car is stolen) and cg is consumption in the good state. Suppose Adam can buy $K worth of insurance at a premium of = 0.6 per K dollars of insurance purchased