Ambiguous life expectancy and the demand for annuities

Hippolyte d’Albis () and Emmanuel Thibault
Additional contact information
Hippolyte d’Albis: CNRS
Authors registered in the RePEc Author Service: Hippolyte d'Albis

Theory and Decision, 2018, vol. 85, issue 3, No 2, 303-319

Abstract: Abstract In this paper, ambiguity aversion to uncertain survival probabilities is introduced in a static life-cycle model with a bequest motive to study the optimal demand for annuities. Provided that annuities’ return is sufficiently large, and notably when it is fair, positive annuitization is known to be the optimal strategy of ambiguity neutral individuals. Conversely, we show that the demand for annuities decreases with ambiguity aversion and that there exists a finite degree of aversion above which the demand is non-positive: the optimal strategy is then to either sell annuities short or to hold zero annuities if the former option is not available. To conclude, ambiguity aversion appears to be a relevant candidate for explaining the annuity puzzle.

Keywords: Demand for annuities; Uncertain survival probabilities; Ambiguity aversion (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
http://link.springer.com/10.1007/s11238-018-9658-8 Abstract (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Ambiguous life expectancy and the demand for annuities (2018)
Working Paper: Ambiguous life expectancy and the demand for annuities (2018)
Working Paper: Ambiguous Life Expectancy and the Demand for Annuities (2012)
Working Paper: Ambiguous Life Expectancy and the Demand for Annuities (2012)
Working Paper: Ambiguous Life Expectancy and the Demand for Annuities (2012)
Working Paper: Ambiguous Life Expectancy and the Demand for Annuities (2012)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:theord:v:85:y:2018:i:3:d:10.1007_s11238-018-9658-8

Ordering information: This journal article can be ordered from
http://www.springer. ... ry/journal/11238/PS2

DOI: 10.1007/s11238-018-9658-8

Access Statistics for this article

Theory and Decision is currently edited by Mohammed Abdellaoui

More articles in Theory and Decision from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().