An Experimental Analysis of Annuity Aversion the Role of Framing and Uncertainty

34 Pages Posted: 23 Nov 2016

See all articles by Sven Nolte

Sven Nolte

University of Muenster - Finance Center Muenster; California Institute of Technology - Economics

Thomas Langer

University of Muenster - Finance Center

Date Written: April 15, 2016

Abstract

To understand the factors that influence people in their retirement decisions is of great importance. Due to an ongoing shift in western societies from public to private pension systems it becomes more and more the task of individual retirees to insure against longevity risk. While economic theory suggests that annuities should account for large parts of a retiree’s income, only few retirees include private annuities in their retirement portfolio at all. Empirical data on what drives this annuity aversion is limited, so we suggest using laboratory experiments to test possible explanations for the low rates of annuitization. We propose an experimental setup and provide a possible framework for future experimental research in the context of annuities. In a first application, we use this framework to test the influence of framing and lifetime uncertainty on annuity aversion.

Keywords: Annuity Aversion, Experimental Economics, Longevity Risk, Lifetime Uncertainty

Suggested Citation

Nolte, Sven and Langer, Thomas, An Experimental Analysis of Annuity Aversion the Role of Framing and Uncertainty (April 15, 2016). Available at SSRN: https://ssrn.com/abstract=2874268 or http://dx.doi.org/10.2139/ssrn.2874268

Sven Nolte (Contact Author)

University of Muenster - Finance Center Muenster ( email )

Universitatsstr. 14-16
Muenster, 48143
Germany

California Institute of Technology - Economics ( email )

United States

Thomas Langer

University of Muenster - Finance Center ( email )

Universitatsstr. 14-16
Muenster, 48143
Germany
+49 251 83 22033 (Phone)

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