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

Diderik Lund and Tore Nilssen ()

No 01-2003, Working Papers from Copenhagen Business School, Department of Economics

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 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 proÞtably detracted from the candidate pooling contract.

Keywords: Insurance; Insurance Companies; Transactional relationships; Reputation (search for similar items in EconPapers)
JEL-codes: D82 G22 L14 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2003-03-20
New Economics Papers: this item is included in nep-ind
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Journal Article: Cream Skimming, Dregs Skimming, and Pooling: On the Dynamics of Competitive Screening (2004) Downloads
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 (2000) Downloads
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