Abstract

http://ssrn.com/abstract=1987618
 


 



Life Expectancy as a Constructed Belief: Evidence of a Live-To or Die-By Framing Effect


John W. Payne


Duke University - Marketing

Namika Sagara


Duke University - Fuqua School of Business

Suzanne B. Shu


University of California, Los Angeles - Anderson School of Management

Kirstin C. Appelt


Columbia University

Eric J. Johnson


Columbia Business School - Marketing

January 18, 2012

Columbia Business School Research Paper No. 12-10

Abstract:     
Expectations about how long one will live are essential for making informed choices about many important personal decisions. We propose that beliefs (expectations) about longevity are a response constructed at the time of judgment, subject to irrelevant task and context factors, and leading to predictable biases. Specifically, we examine whether life expectancy is affected by the framing of expectations questions, as well as by factors that actually affect longevity such as the age, gender, and self-reported health status of the respondent. One frame asks people to provide probabilities of living to a certain age or older; the other frame asks people to provide probabilities of dying by a certain age or younger. These two answers should be complements, but we find that estimated probabilities differ significantly in the two conditions. People in the live-to frame report that they have a 55% chance of being alive at age 85, whereas people in the die-by frame report that they have a 68% chance of being dead at age 85. Overall, estimated mean life expectancies, across three studies and over 2300 respondents were between 7.29 to 9.17 years longer when solicited in the live-to frame. We compare estimated life expectancies with Social Security Administration (SSA) life tables and find that the judgments of individuals in the live-to frame were closer to actual life expectancies for ages 65 and 75, while in the die-by condition, the respondents were more accurate for older ages, e.g., age 95. On a process level, we show that the framing effect on judgments is partially mediated by the relative number of thoughts in favor of being alive at that age. Finally, we find that individual differences in life expectancies relate to differences in stated preference for life annuities, a product that provides insurance against outliving one’s savings. The implications of “constructed” life expectancies for models of financial decision making, and for improving financial decision making are discussed.

Number of Pages in PDF File: 32

Keywords: Behavioral Economics, Personal Finance, Expectations

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Date posted: January 18, 2012  

Suggested Citation

Payne, John W. and Sagara, Namika and Shu, Suzanne B. and Appelt, Kirstin C. and Johnson, Eric J., Life Expectancy as a Constructed Belief: Evidence of a Live-To or Die-By Framing Effect (January 18, 2012). Columbia Business School Research Paper No. 12-10. Available at SSRN: http://ssrn.com/abstract=1987618 or http://dx.doi.org/10.2139/ssrn.1987618

Contact Information

John W. Payne (Contact Author)
Duke University - Marketing ( email )
United States
Namika Sagara
Duke University - Fuqua School of Business ( email )
Box 90120
Durham, NC 27708-0120
United States
Suzanne B. Shu
University of California, Los Angeles - Anderson School of Management ( email )
110 Westwood Plaza
Los Angeles, CA 90095-1481
United States
Kirstin C. Appelt
Columbia University ( email )
3022 Broadway
New York, NY 10027
United States
HOME PAGE: http://www.kirstinappelt.com
Eric J. Johnson
Columbia Business School - Marketing ( email )
New York, NY 10027
United States

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