2. (4%) Suppose that the accident inflicts a damage $2 to each of the two girls. Can Gigi and Helen make an arrangement of mutual insurance that would constitute Pareto improvement over the case of no insurance? If yes, how; and if no, why not?

3. (3%) Suppose that Helen will suffer a higher loss, $4 (while Gigi's damages of accident remain at $2). If Irene proposes the following arrangement: Gigi gives Helen $a > 0 if there is no accident, and Helen gives Gigi $b > 0 if the accident occurs. Will this kind of arrangement Pareto dominate no insurance?

2. (4%) Suppose that the accident inflicts a damage $2 to each of the two girls. Can Gigi and Helen make an arrangement of mutual insurance that would constitute Pareto improvement over the case of no insurance? If yes, how; and if no, why not?

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