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In the basic model of insurance, income is the only input into aperson's utility. This is obviously not realistic. If we relax our assumption that
- In the basic model of insurance, income is the only input into aperson's utility. This is obviously not realistic. If we relax our assumption that utility is determined only by income levels, can any insurance contract providefullprotection against the possibility of becoming severely ill? Give examples of risks associated with becoming sick that are not typically covered by formal health insurance. Can you think of ways that people informally insure against these "uninsurable" risks?
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