The Pivotal Role of Fairness: Which Consumers Like Annuities?

24 Pages Posted: 24 Sep 2018

See all articles by Suzanne B. Shu

Suzanne B. Shu

University of California, Los Angeles - Anderson School of Management

Robert Zeithammer

University of California, Los Angeles (UCLA) - Anderson School of Management

John W. Payne

Duke University - Marketing

Date Written: September 2018

Abstract

Life annuities can be a valuable component of the decumulation stage of wealth during retirement. While economists argue that most retirees should annuitize, actual demand in the marketplace is low. We analyze data from two studies to determine how measurable individual differences among consumers affect their interest in annuities. We find that a relatively high percentage of respondents dislike all annuities. Demographic factors are not predictive of which individuals dislike annuities, and individual factors predicted by economic models to be important (such as beneficiaries) have small or even opposite effects. The strongest individual differences we measured that predicts liking of annuities is the respondent’s perception of product fairness. We discuss implications of our findings for financial planners hoping to help their customers with these decumulation challenges.

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Suggested Citation

Shu, Suzanne B. and Zeithammer, Robert and Payne, John W., The Pivotal Role of Fairness: Which Consumers Like Annuities? (September 2018). NBER Working Paper No. w25067. Available at SSRN: https://ssrn.com/abstract=3254042

Suzanne B. Shu (Contact Author)

University of California, Los Angeles - Anderson School of Management ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States

Robert Zeithammer

University of California, Los Angeles (UCLA) - Anderson School of Management ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States

John W. Payne

Duke University - Marketing ( email )

United States

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