The Probationary Period as a Screening Device: The Monopolistic Insurer

Jaap Spreeuw

The Geneva Papers on Risk and Insurance Theory, 2005, vol. 30, issue 1, 5-14

Abstract: Stiglitz [1977], considering asymmetry of information in a monopolistic insurance market and the monetary deductible as a screening device, shows that an equilibrium is always of a separating type. High risks buy complete insurance whilst low risks buy partial insurance. In this paper, we show that a pooling equilibrium may exist if a probationary period, rather than the partial coverage in monetary terms, is used as a screening device. Copyright The Geneva Association 2005

Keywords: probationary periods; adverse selection; monopoly; separating equilibrium; pooling equilibrium (search for similar items in EconPapers)
Date: 2005
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DOI: 10.1007/s10836-005-1104-5

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