In class, we showed that if a risk adverse consumer was offered “fair” insurance (i.e. 7 = ), she would fully insure against the risk. Show that if the insurance is not fair (i.e. <7), the consumer may still insure, but not fully against the risk.

Transcribed Image Text:4. In class, we showed that if a risk adverse consumer was offered “fair” insurance (i.e. =), she would fully insure against the risk. Show that if the insurance is not fair (i.e. <), the consumer may still insure, but not fully...
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