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Assume that the insurer can NOT distinguish between the two types of consumers, and can offer...

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Economics

Assume that the insurer can NOT distinguish between the twotypes of consumers, and can offer only one policy (the same policyto everyone). What will be the breakeven policy premium IF everyonebuys the policy? With such a premium, will everyone actually buythe policy? Over long run, what will be the equilibrium policypremium in the market and who will get insurance?

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The insurer will prefer to charge a high premium from the consumers who might default and will agree to charge a low premium from the consumers who have a lower chance of defaulting Now if the insurer doesnt know whether which type of    See Answer
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