Cognition, Optimism and the Formation of Age-Dependent Survival Beliefs

60 Pages Posted: 18 Apr 2018

See all articles by Nils Grevenbrock

Nils Grevenbrock

Goethe University Frankfurt - Research Center SAFE

Max Groneck

Stockholm School of Economics, Department of Economics

Alexander Ludwig

Leibniz Institute for Financial Research SAFE; University of Cologne - Faculty of Management, Economics and Social Sciences

Alexander Zimper

University of Pretoria; Kiel Institute for the World Economy

Multiple version iconThere are 3 versions of this paper

Date Written: 2018

Abstract

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

JEL Classification: D12, D83, I10

Suggested Citation

Grevenbrock, Nils and Groneck, Max and Ludwig, Alexander and Zimper, Alexander, Cognition, Optimism and the Formation of Age-Dependent Survival Beliefs (2018). ZEW - Centre for European Economic Research Discussion Paper No. 18-015. Available at SSRN: https://ssrn.com/abstract=3164204 or http://dx.doi.org/10.2139/ssrn.3164204

Nils Grevenbrock (Contact Author)

Goethe University Frankfurt - Research Center SAFE ( email )

(http://www.safe-frankfurt.de)
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany

Max Groneck

Stockholm School of Economics, Department of Economics ( email )

Germany

HOME PAGE: http://https://www.hhs.se/en/Research/Departments/DE/

Alexander Ludwig

Leibniz Institute for Financial Research SAFE ( email )

(http://www.safe-frankfurt.de)
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany

University of Cologne - Faculty of Management, Economics and Social Sciences ( email )

Albertus-Magnus-Platz
Cologne, D-50923
Germany

HOME PAGE: http://www.wiso.uni-koeln.de/cmr/alexludwig

Alexander Zimper

University of Pretoria ( email )

South Africa

Kiel Institute for the World Economy ( email )

P.O. Box 4309
Kiel, Schleswig-Hosltein D-24100
Germany

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