The Probationary Period as a Screening Device: The Monopolistic Insurer

摘要

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. The Geneva Risk and Insurance Review (2005) 30, 5–14. doi:10.1007/s10836-005-1104-5