Document de travail

Ambiguous Life Expectancy and the Demand for Annuities

Hippolyte D'Albis et Emmanuel Thibault

Résumé

In this paper, ambiguity aversion to uncertain survival probabilities is introduced in a life-cycle model with a bequest motive to study the optimal demand for annuities. Provided that annuities return is sufficiently large, and notably when it is fair, positive annuitization is known to be the optimal strategy of ambiguity neutral individuals. Conversely, we show that the demand for annuities decreases with ambiguity aversion and that there exists a finite degree of aversion above which the demand is non positive: the optimal strategy is then to either sell annuities short or to hold zero annuities if the former option is not available. To conclude, ambiguity aversion appears as a relevant candidate for explaining the annuity puzzle.

Codes JEL

  • D11: Consumer Economics: Theory
  • D81: Criteria for Decision-Making under Risk and Uncertainty
  • G11: Portfolio Choice • Investment Decisions
  • G22: Insurance • Insurance Companies • Actuarial Studies

Remplacé par

Hippolyte D'Albis et Emmanuel Thibault, « Ambiguous Life Expectancy and the Demand for Annuities », Theory and Decision, vol. 85, n° 3-4, octobre 2018, p. 303–319.

Référence

Hippolyte D'Albis et Emmanuel Thibault, « Ambiguous Life Expectancy and the Demand for Annuities », TSE Working Paper, n° 12-323, juillet 2012.

Voir aussi

Publié dans

TSE Working Paper, n° 12-323, juillet 2012