insurance markets can be bad when there is adverse selection. Using the dual theory of choice under risk, we are able to fully … characterize both the competitive and the monopoly market outcomes. When there are two types of risk, the monopoly dominates … competition is less trivial. In effect monopoly is shown to provide better insurance but at the cost of driving out some agents …

quantity discounts). We contrast our results with the standard monopoly model with private values and quasilinear preferences … these differences. Although we focus on the monopoly insurance problem, our proofs can be adapted to other screening …