Rational Pension Products for Irrational People

Zvi Bodie

Boston University - Department of Finance & Economics

Henriette M. Prast

Tiburg University

December 30, 2008

The aim of this paper is to explore a new type of pension plan tailored to the needs and preferences of individuals living in Europe. The personal pension accounts that we propose are semi-tailored contracts that are rational when judged from the perspective of normative economic theory. Such contracts can be designed and marketed through an employer, a trade union, or other trusted institution so as to minimize agency costs and take advantage of scale economies. Moreover, they can be offered as optimal defaults to groups of plan members with similar characteristics. There is much that governments can do at very low cost to facilitate the efficient production of these contracts.

Keywords: pensions, behavioral economics, guarantees

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Date posted: January 5, 2009  

Suggested Citation

Bodie, Zvi and Prast, Henriette M., Rational Pension Products for Irrational People (December 30, 2008). Available at SSRN: http://ssrn.com/abstract=1321884

Contact Information

Zvi Bodie
Boston University - Department of Finance & Economics ( email )
United States
HOME PAGE: http://www.zvibodie.com
Henriette M. Prast (Contact Author)
Tiburg University ( email )
P.O. Box 90153
Tilburg, 5000 LE
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