Adverse Selection -No asymmetric information but a fixed price Now assume a distribution of people with different values of兀 Characterized by a density g()which is continuous on the interval [o 1] Assume any fixed price p, and assume(for simplicity that the only available insurance contract perfectly insures (i.e. I=4 Then everyone for whom: U(Y-p2)>(1-m)U(1)+U(Y-2),wll InsureAdverse Selection– No asymmetric information, but a fixed price. Now assume a distribution of people with different values of . Characterized by a density g which is continuous on the interval 0, 1. Assume any fixed price p, and assume (for simplicity) that the only available insurance contract perfectly insures (i.e. I  Z). Then everyone for whom: UY  pZ  1  UY  UY  Z, will insure