Cream Skimming, Dregs Skimming, and Pooling

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Cream Skimming, Dregs Skimming, and Pooling

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Title: Cream Skimming, Dregs Skimming, and Pooling
On the Dynamics of Competitive Screening
Author: Lund, Diderik; Nilssen, Tore
Abstract: 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.
URI: http://hdl.handle.net/10398/7596
Date: 2003-10-21

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