Cream Skimming, Dregs Skimming, and Pooling: On the Dynamics of Competitive Screening
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.
|Date of creation:||20 Mar 2003|
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