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Cream Skimming, Dregs Skimming, and Pooling: On the Dynamics of Competitive Screening

Diderik Lund and Tore Nilssen ()

The Geneva Papers on Risk and Insurance Theory, 2004, vol. 29, issue 1, 23-41

Abstract: We discuss the existence of a pooling equilibrium in a two-period model of an insurance market with asymmetric information. We solve the model numerically. We pay particular attention to the reasons for non-existence in cases where no pooling equilibrium exists. In addition to the phenomenon of cream skimming emphasized in earlier literature, we here point to the importance of the opposite: dregs skimming, whereby high-risk consumers are profitably detracted from the candidate pooling contract.

Date: 2004
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Journal Article: Cream Skimming, Dregs Skimming, and Pooling: On the Dynamics of Competitive Screening (2004) Downloads
Working Paper: Cream Skimming, Dregs Skimming, and Pooling: On the Dynamics of Competitive Screening (2003) Downloads
Working Paper: Cream skimming, dregs skimming, and pooling: on the dynamics of competitive screening (2000) Downloads
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