Time Inconsistent Preferences and the Annuitization Decision


Schreiber, Philipp ; Weber, Martin


[img]
Preview
PDF
SSRN-id2217701.pdf - Published

Download (1MB)

URL: https://ub-madoc.bib.uni-mannheim.de/34214
URN: urn:nbn:de:bsz:180-madoc-342140
Document Type: Working paper
Year of publication: 2013
Place of publication: Mannheim
Publication language: English
Institution: Business School > ABWL u. Finanzwirtschaft, insbes. Bankbetriebslehre (Weber -2017)
Subject: 330 Economics
Classification: JEL: D14 , D91 , G02 , H55 , J14 , J26,
Keywords (English): Annuity Puzzle , annuities , Longevity Risk , insurance , Behavioral Finance , Household Finance , Survey Study
Abstract: Good news can involve difficult decisions. For example winning a lottery jackpot can go along with the decision, whether to have the jackpot paid out immediately as a lump sum or as periodic annual payments. Also when entering retirement most people face the decision whether they want their defined contribution account balance paid as a lump sum or to annuitize that amount. The fact that people tend to choose the lump sum even if economic reasons suggest that they should choose the annuity is called the annuity paradox. In a large online survey we find that people behave time inconsistent: older people have a stronger tendency to choose the lump sum than younger people when they are asked to predict today what to choose when they retire. This effect is considerably stronger for participants that answer simple time preference questions inconsistently. Our findings suggest to think about precommitment devices for the annuitization decision, in the retirement case, already at the time when the defined benefit plan is started.

Dieser Eintrag ist Teil der Universitätsbibliographie.

Das Dokument wird vom Publikationsserver der Universitätsbibliothek Mannheim bereitgestellt.




+ Export and Citation


Choose a citation style.

+ Search Authors in

+ Download Statistics

Downloads per month over past year

View more statistics



You have found an error? Please let us know about your desired correction here: E-Mail


Actions (login required)

Show item Show item