A life-cycle model with ambiguous survival beliefs

Based on a cognitive notion of neo-additive capacities reflecting likelihood insensitivity with respect to survival chances, we construct a Choquet Bayesian learning model over the life-cycle that generates a motivationa
Based on a cognitive notion of neo-additive capacities reflecting likelihood insensitivity with respect to survival chances, we construct a Choquet Bayesian learning model over the life-cycle that generates a motivational notion of neo-additive survival beliefs expressing ambiguity attitudes. We embed these neo-additive survival beliefs as decision weights in a Choquet expected utility life-cycle consumption model and calibrate it with data on subjective survival beliefs from the Health and Retirement Study. Our quantitative analysis shows that agents with calibrated neo-additive survival beliefs (i) save less than originally planned, (ii) exhibit undersaving at younger ages, and (iii) hold larger amounts of assets in old age than their rational expectations counterparts who correctly assess their survival chances. Our neo-additive life-cycle model can therefore simultaneously accommodate three important empirical findings on household saving behavior.
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Metadaten
Author:Max Groneck, Alexander Ludwig, Alexander Zimper
URN:urn:nbn:de:hebis:30:3-393031
URL:http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2515703
DOI:http://dx.doi.org/10.2139/ssrn.2515703
Parent Title (English):SAFE working paper series ; No. 73 [version October 2, 2015]
Series (Serial Number):SAFE working paper series (73 [ver 2015])
Publisher:SAFE
Place of publication:Frankfurt am Main
Document Type:Working Paper
Language:English
Date of Publication (online):2015/10/02
Year of first Publication:2015
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2016/02/02
Tag:Bayesian learning; Choquet expected utility; ambiguity; dynamic inconsistency; life-cycle hypothesis; likelihood insensitivity; saving puzzles
Issue:October 2, 2015
Pagenumber:60
HeBIS PPN:372417728
Institutes:Wirtschaftswissenschaften
House of Finance (HoF)
Center for Financial Studies (CFS)
Sustainable Architecture for Finance in Europe (SAFE)
Dewey Decimal Classification:330 Wirtschaft
JEL-Classification:D83 Search; Learning; Information and Knowledge; Communication; Belief
D91 Intertemporal Consumer Choice; Life Cycle Models and Saving
E21 Consumption; Saving; Wealth
Sammlungen:Universitätspublikationen
Licence (German):License Logo Veröffentlichungsvertrag für Publikationen

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