Consider the optimal allocation (c0;c2e;c2u) that is implemented by the optimal insurance system you computed in...

Consider the optimal allocation (c0;c2e;c2u) that is implemented by the optimal insurance system you computed in question 1 part c. Observe that we assumed agents cannot borrow or save on their own. If they were allowed to save and borrow privately, can the optimal insurance system still implement the optimal allocation? Show your work.

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Rahul Sunny answered 1 year ago

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