Abstract:
Based on a cognitive notion of neo-additive capacities re ecting likelihood in-
sensitivity 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 ndings on household saving behavior.
