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An experimental test of the under-annuitization puzzle with smooth ambiguity and charitable giving

d’Albis, Hippolyte, Giuseppe Attanasi and Emmanuel Thibault
Authors registered in the RePEc Author Service: Hippolyte d'Albis ()

Journal of Economic Behavior & Organization, 2020, vol. 180, issue C, 694-717

Abstract: In a life-cycle model with a bequest motive, we study the impact of smooth ambiguity aversion to uncertain survival probabilities on the optimal demand for annuities. We implement a theory-driven laboratory experiment. First, a subject’s ambiguity attitude is elicited in a simple experimental setting able to make the smooth ambiguity model operational. Then, in a two-period annuity-bequest decision problem, the subject’s bequest in the second period is presented as a donation to a previously chosen charity, contingent to the subject being active after the first period. In line with the theoretical predictions, we find that ambiguity-averse (resp., loving) subjects invest less (resp., more) in annuities than ambiguity-neutral ones. Furthermore, subjects’ contingent donation to the chosen charity increases in their investment in annuities only for sufficiently high levels of warm-glow altruism.

Keywords: Self-insurance; Annuity; Uncertain survival probabilities; Smooth ambiguity aversion; Charity; Experiment (search for similar items in EconPapers)
JEL-codes: C91 D81 G22 (search for similar items in EconPapers)
Date: 2020
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Related works:
Working Paper: An experimental test of the under-annuitization puzzle with smooth ambiguity and charitable giving (2020)
Working Paper: An experimental test of the under-annuitization puzzle with smooth ambiguity and charitable giving (2020)
Working Paper: An Experimental Test of the Under-Annuitization Puzzle with Smooth Ambiguity and Charitable Giving (2019) Downloads
Working Paper: An Experimental Test of the Under-Annuitization Puzzle with Smooth Ambiguity and Charitable Giving (2019) Downloads
Working Paper: An Experimental Test of the Under-Annuitization Puzzle with Smooth Ambiguity and Charitable Giving (2018) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:180:y:2020:i:c:p:694-717

DOI: 10.1016/j.jebo.2019.09.019

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