Adverse selection in the annuity market with sequential and simultaneous insurance demand

Johann Brunner () and Susanne Pech ()

The Geneva Papers on Risk and Insurance Theory, 2006, vol. 31, issue 2, 111-146

Abstract: This paper investigates the effect of adverse selection on the private annuity market in a model with two periods of retirement and two types of individuals, who differ in their life expectancy. In order to introduce the existence of time-limited pension insurance, we consider a model where for each period of retirement separate contracts can be purchased. Demand for the two periods can be decided sequentially or simultaneously. We show that only a situation where all risk types choose sequential contracts is an equilibrium and that this outcome is favourable for the long-living, but is unfavourable for the short-living individuals. Copyright Springer Science + Business Media, LLC 2006

Keywords: Annuity market; Adverse selection; Uncertain lifetime; Equilibrium (search for similar items in EconPapers)
Date: 2006
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Journal Article: Adverse selection in the annuity market with sequential and simultaneous insurance demand (2006)
Working Paper: Adverse Selection in the Annuity Market with Sequential and Simultaneous Insurance Demand (2002)
Working Paper: Adverse selection in the annuity market with sequential and simultaneous insurance demand (2002)
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DOI: 10.1007/s10713-006-0558-4

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