Cognition, optimism and the formation of age-dependent survival beliefs
Alexander Ludwig and
No 200, SAFE Working Paper Series from Research Center SAFE - Sustainable Architecture for Finance in Europe, Goethe University Frankfurt
This paper investigates the roles psychological biases play in empirically estimated deviations between subjective survival beliefs (SSBs) and objective survival probabilities (OSPs). We model deviations between SSBs and OSPs through age-dependent inverse S-shaped probability weighting functions (PWFs), as documented in experimental prospect theory. Our estimates suggest that the implied measures for cognitive weakness, likelihood insensitivity, and those for motivational biases, relative pessimism, increase with age. We document that direct measures of cognitive weakness and motivational attitudes share these trends. Our regression analyses confirm that these factors play strong quantitative roles in the formation of subjective survival beliefs. In particular, cognitive weakness is an increasingly important contributor to the overestimation of survival chances in old age.
Keywords: Subjective Survival Beliefs; Probability Weighting Function; Confirmatory Bias; Cognition; Optimism (search for similar items in EconPapers)
JEL-codes: D12 D83 I10 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-age, nep-cbe, nep-cis, nep-isf, nep-neu and nep-upt
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Working Paper: Cognition, Optimism and the Formation of Age-Dependent Survival Beliefs (2018)
Working Paper: Cognition, optimism and the formation of age-dependent survival beliefs (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:safewp:200
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