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

Hippolyte d'Albis (), Giuseppe Attanasi () and Emmanuel Thibault
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Emmanuel Thibault: TSE - Toulouse School of Economics - UT1 - Université Toulouse 1 Capitole - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique

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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.

Date: 2020
Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-02398675
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Published in Journal of Economic Behavior and Organization, Elsevier, 2020, 180, pp.694-717. ⟨10.1016/j.jebo.2019.09.019⟩

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Journal Article: An experimental test of the under-annuitization puzzle with smooth ambiguity and charitable giving (2020) Downloads
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:hal:journl:halshs-02398675

DOI: 10.1016/j.jebo.2019.09.019

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