Oh, I think that also means that section is slightly wrong. You want to take insurance if
log(Wyou−P)>plog(Wyou−c)+(1−p)log(Wyou)
and the insurance company wants to offer it if
log(Wthem)<plog(Wthem+P−c)+(1−p)log(Wthem+P).
So define
V(W)=log(W−P)−(plog(W−c)+(1−p)log(W))
as you did above. Appendix B suggests that you’d take insurance if V(Wyou)>0 and they’d offer it if V(Wthem)<0. But in fact they’d offer it if V(Wthem+P)<0.
Oh, I think that also means that section is slightly wrong. You want to take insurance if
log(Wyou−P)>plog(Wyou−c)+(1−p)log(Wyou)and the insurance company wants to offer it if
log(Wthem)<plog(Wthem+P−c)+(1−p)log(Wthem+P).So define
V(W)=log(W−P)−(plog(W−c)+(1−p)log(W))as you did above. Appendix B suggests that you’d take insurance if V(Wyou)>0 and they’d offer it if V(Wthem)<0. But in fact they’d offer it if V(Wthem+P)<0.