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An Experimental Test of the Under-Annuitization Puzzle with Smooth Ambiguity and Charitable Giving

Giuseppe Attanasi (), Hippolyte d'Albis () and Emmanuel Thibault ()

No 18-932, TSE Working Papers from Toulouse School of Economics (TSE)

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.

Keywords: Self-insurance; annuity; uncertain survival probabilities; smooth ambiguity aversion; charity; experiment (search for similar items in EconPapers)
JEL-codes: C91 D81 G22 (search for similar items in EconPapers)
Date: 2018-07
New Economics Papers: this item is included in nep-exp and nep-upt
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Related works:
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 (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
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