 Ambiguous life expectancy and the demand for annuitiesHippolyte d'Albis and Emmanuel Thibault Post-Print from HAL 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) Published in Theory and Decision, 2018, 85 (3-4), pp.303-319. ⟨10.1007/s11238-018-9658-8⟩ There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-02072559 DOI: 10.1007/s11238-018-9658-8 Access Statistics for this paper More papers in Post-Print from HAL |
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