Insurance- assume that there is some probability T that a negative shock Z occurs (1-丌)U()+U(y-2) Assume further that insurance exists at price p In that case. individuals solve max(1-n(r-pD+U(r-Z+I-plInsurance– assume that there is some probability that a negative shock Z occurs. 1 UY UY Z Assume further that insurance exists at price “p”. In that case, individuals solve: max I 1 UY pI UY Z I pI