1. Actual insurance contracts are more complicated because a single contract will offer coverage against many potential losses. A formal generalization of the scheme above to cover this case is straightforward. Suppose that an individual will, in the ab- sence of insurance, have an income of Wi if state i occurs. An insurance contract is simply an n-tuple (a1, . . . , an) whose i-th coordinate describes the net payment of the individual to the insurance company if state i occurs. We confine our discussion to the simple case mentioned in the text, although it could be trivially extended to this more complicated case.