A parsimonious model of subjective life expectancy
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Date
Authors
Ludwig, Alexander
Zimper, Alexander
Journal Title
Journal ISSN
Volume Title
Publisher
Springer
Abstract
On average, “young” people underestimate whereas “old” people overestimate their chances to survive into the future. Such subjective survival beliefs violate the rational expectations paradigm and are also not in line with models of rational Bayesian learning. In order to explain these empirical patterns in a parsimonious manner, we assume that self-reported beliefs express likelihood insensitivity and can, therefore, be modeled as non-additive beliefs. In a next step we introduce a closed form model of Bayesian learning for non-additive beliefs which combines rational learning with psychological attitudes in the interpretation of information. Our model gives a remarkable fit to average subjective survival beliefs reported in the Health and Retirement Study.
Description
Keywords
Representative agent, Subjective survival expectations, Likelihood insensitivity, Choquet decision theory, Bayesian learning
Sustainable Development Goals
Citation
Ludwig, A & Zimper A 2013, 'A parsimonious model of subjective life expectancy', Theory and Decision, vo. 75, no. 4, pp. 519-541.