Market Evidence of Misperceived Prices and Mistaken Mortality Risks

Jay Bhattacharya, Dana Goldman and Neeraj Sood

No 9863, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We construct and implement a test of rational consumer behavior in a highstakes financial market. In particular, we test whether consumers make systematic mistakes in perceiving their mortality risks. We implement this test using data from secondary life insurance markets where consumers with a lifethreatening illness sell their life insurance policies to firms in return for an up-front payment. We compare predictions from two models: one with consumers who correctly perceive their mortality risk, and one with consumers who are misguided about their life expectancy, and find that our data are most consistent with the predictions made by the second model.

JEL-codes: D8 (search for similar items in EconPapers)
Date: 2003-07
New Economics Papers: this item is included in nep-hea
Note: AG EH
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Citations: View citations in EconPapers (5)

Published as Bhattacharya, Jay & Goldman, Dana & Sood, Neeraj, 2009. "Market evidence of misperceived mortality risk," Journal of Economic Behavior & Organization, Elsevier, vol. 72(1), pages 451-462, October.

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