Why Don't People Insure Late Life Consumption? A Framing Explanation of the Under-Annuitization Puzzle
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Nber Working Paper Series Why Don't People Insure Late Life Consumption: a Framing Explanation of the Under-annuitization Puzzle
Rational models of risk-averse consumers have difficulty explaining limited annuity demand. We posit that consumers evaluate annuity products using a narrow "investment frame" that focuses on risk and return, rather than a "consumption frame" that considers the consequences for lifelong consumption. Under an investment frame, annuities are quite unattractive, exhibiting high risk without high r...
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