Working Paper Series, Department of Economics, Copenhagen Business School
Diderik Lund and Tore Nilssen
Cream Skimming, Dregs Skimming, and Pooling: On the Dynamics of Competitive Screening.
Abstract: We discuss the existence of a pooling equilibrium in a
of an insurance market with asymmetric information. We
solve the model
numerically. We pay particular attention to the reasons
in cases where no pooling equilibrium exists. In
addition to the phenom-
enon of cream skimming emphasized in earlier
literature, we here point
to the the importance of the opposite: dregs
skimming, whereby high-risk
consumers are proŞtably detracted from the
candidate pooling contract.
Keywords: Insurance; Insurance Companies; Transactional relationships; Reputation; (follow links to similar papers)
JEL-Codes: D82; G22; L14; (follow links to similar papers)
24 pages, March 20, 2003
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