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Question 3 (30%): Pooling Equilibrium. Imagine an economy with no health insurance, public or private, and two types of citizens, frail and robust. Frail individuals

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Question 3 (30%): Pooling Equilibrium. Imagine an economy with no health insurance, public or private, and two types of citizens, frail and robust. Frail individuals are more likely to get sick. A firm decides to enter the market and offer a single health insurance contract, since it is not possible to distinguish between the two types and the firm is not savvy enough to generate a separating equilibrium. After the success, other firms are willing to enter the market. Under which conditions this pooling equilibrium is stable, if any, and why? Fully explain your reasoning

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