Observe some low types are shut out. The transfer function is, from (6.2.17),
Observe the transfer can be reexpressed as a traditional tariff:
32,
33
It is readily verified that there are quantity discounts (e.g., 2T(x)> T(2x)).
6.2.2 The Monopoly Provision of Insurance
The analysis of the previous subsection covers a wide variety of trading situations and,
via suitable redefinition of variables, an even wider array of contractual situations, but
(2β
−
1)γ
−
c(1
+
x)
1+x
.
x(β)=
0,ifβ≤
γ+c
2γ
(2β−1)γ−c
c
,otherwise
.
t
(β)=βγlog
(
x(β)+1
)
−
β
0
γlog
(
x(z)+1
)
dz
=
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