Article

Optimal annuitization, uncertain survival probabilities, and maxmin preferences

Hippolyte D'Albis, and Emmanuel Thibault

Abstract

We consider a life-cycle model with bequest motives, and assume that the individual does not know his/her survival probability and has maxmin utility preferences;weshow that it is optimal not to annuitize but to purchase pure life insurance policies instead.

Keywords

Demand for annuities; Uncertain survival probabilities; Uncertainty aversion; Maxmin;

JEL codes

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

Reference

Hippolyte D'Albis, and Emmanuel Thibault, Optimal annuitization, uncertain survival probabilities, and maxmin preferences, Economics Letters, Elsevier, vol. 115, n. 2, May 2012, pp. 296–299.

Published in

Economics Letters, Elsevier, vol. 115, n. 2, May 2012, pp. 296–299