A parsimonious model of subjective life expectancy

Alexander Ludwig and Alexander Zimper

Theory and Decision, 2013, vol. 75, issue 4, 519-541

Abstract: On average, “young” people underestimate whereas “old” people overestimate their chances to survive into the future. Such subjective survival beliefs violate the rational expectations paradigm and are also not in line with models of rational Bayesian learning. In order to explain these empirical patterns in a parsimonious manner, we assume that self-reported beliefs express likelihood insensitivity and can, therefore, be modeled as non-additive beliefs. In a next step we introduce a closed form model of Bayesian learning for non-additive beliefs which combines rational learning with psychological attitudes in the interpretation of information. Our model gives a remarkable fit to average subjective survival beliefs reported in the Health and Retirement Study. Copyright Springer Science+Business Media New York 2013

Keywords: Representative agent; Subjective survival expectations; Likelihood insensitivity; Choquet decision theory; Bayesian learning; C44; D83; D91; I10 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (38)

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Related works:
Working Paper: A Parsimonious Model of Subjective Life Expectancy (2007)
Working Paper: A parsimonious model of subjective life expectancy (2007)
Working Paper: A Parsimonious Model of Subjective Life Expectancy (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:kap:theord:v:75:y:2013:i:4:p:519-541

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DOI: 10.1007/s11238-013-9355-6

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