An Experimental Test of the Under-Annuitization Puzzle with Smooth Ambiguity and Charitable Giving

Attanasi, Giuseppe Marco, D'Albis, Hippolyte and Thibault, Emmanuel (2019) An Experimental Test of the Under-Annuitization Puzzle with Smooth Ambiguity and Charitable Giving. Journal of Economic Behavior and Organization. (In Press)

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Abstract

In a life-cycle model with a bequest motive, we study the impact of smooth ambiguity aversion to uncertain survival probabilities on the optimal demand for annuities. We implement a theory-driven laboratory experiment. First, a subject's ambiguity attitude is elicited in a simple experimental setting able to make the smooth ambiguity model operational. Then, in a two-period annuity-bequest decision problem, the subject's bequest in the second period is presented as a donation to a previously chosen charity, contingent to the subject being active after the first period. In line with the theoretical predictions, we find that ambiguity-averse (resp., loving) subjects invest less (resp., more) in annuities than ambiguity-neutral ones. Furthermore, subjects'contingent donation to the chosen charity increases in their investment in annuities only for sufficiently high levels of warm-glow altruism.

Item Type: Article
Language: English
Date: 2019
Refereed: Yes
Subjects: B- ECONOMIE ET FINANCE
Divisions: TSE-R (Toulouse)
Site: UT1
Date Deposited: 26 Sep 2019 09:34
Last Modified: 26 Sep 2019 09:34
["eprint_fieldname_oai_identifier" not defined]: oai:tse-fr.eu:123567
URI: http://publications.ut-capitole.fr/id/eprint/32787

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