Business, 06.12.2021 22:10 zel990252

Suppose that you work for Gecko Car Insurance and are tasked with pricing decisions. Suppose that there are 10 bad drivers in the market who all have a 43% chance of filing a claim, 20 good drivers who all have a 9% chance of filing a claim, and 20 excellent drivers who all have a 1% chance of filing a claim. To simplify, assume that any time an accident occurs, Gecko must pay $1000 to insured drivers. Drivers without insurance face the same cost if they do not have insurance. Assume all drivers are risk neutral and that insurance costs $200. At this price, which drivers choose to buy car insurance? a. bad drivers
b. good drivers
c. excellent drivers
If the above description includes all revenue and costs, what is Gecko's expected profit?
To earn positive expected profit, what is the minimum amount Gecko must charge for insurance?
a. $200
b. $201
c. $490
d. $491
e. $4901
f. There is no price at which Gecko will earn a positive profit

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Suppose that you work for Gecko Car Insurance and are tasked with pricing decisions. Suppose that th...

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