NOVAFRICA News: New article accepted for publication in the American Economic Journal: Microeconomics

Congratulations to Professor Priscila De Oliveira (NOVAFRICA, Nova School of Business and Economics), Erzo F.P. Luttmer (Dartmouth), and Dmitry Taubinsky (UC Berkeley) on their latest paper:
 
“Failures of Contingent Reasoning in Annuitization Decisions”

Abstract:

This paper studies psychological biases in take-up of annuities, using an incentivized experiment with a probability-based sample (N = 3,038). Choosing an annuity was payoff-maximizing in the experiment at all prices, but take-up was incomplete and price elastic. Reformulating decisions as insurance against a “bad” outcome rather than insurance against “longevity risk” did not increase take-up. Instead, we find substantial failures of contingent reasoning: participants under-appreciated how annuitization mitigated the need for less-efficient means of saving for retirement. Increasing the salience of the interaction with savings decisions or eliminating the need to think through this interaction altogether, substantially increased annuity take-up.

More Information about the article here.