Sensitivity to Market Incentives: The Case of Policy Loans
AbstractThe standard neoclassical theory is rejected as an explanation for the observed reluctance of most holders of whole life insurance to borrow against the cash value of their policies at favorable rates of interest. Even when the neoclassical theory is augmented with transactions costs and short awareness lags, several empirical tests using survey and time-series data reject the standard theory in favor of an explanation invoking self-imposed rules against borrowing or the "debt ethic." This evidence lends support to the psychology-based theories of Thaler and Shefrin (1981). Copyright 1987 by MIT Press.
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Bibliographic InfoArticle provided by MIT Press in its journal Review of Economics & Statistics.
Volume (Year): 69 (1987)
Issue (Month): 2 (May)
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- B. Douglas Bernheim & Antonio Rangel, 2005.
"Behavioral Public Economics: Welfare and Policy Analysis with Non-Standard Decision-Makers,"
NBER Working Papers
11518, National Bureau of Economic Research, Inc.
- B. Douglas Bernheim & Antonio Rangel, 2005. "Behavioral Public Economics: Welfare and Policy Analysis with Non-Standard Decision-Makers," Discussion Papers 04-033, Stanford Institute for Economic Policy Research.
- James Choi & David Laibson & Brigitte Madrian, 2008.
"$100 Bills on the Sidewalk: Suboptimal Investment in 401(K) Plans,"
Yale School of Management Working Papers
amz2519, Yale School of Management, revised 01 Jul 2009.
- James J. Choi & David Laibson & Brigitte C. Madrian, 2011. "$100 Bills on the Sidewalk: Suboptimal Investment in 401(k) Plans," The Review of Economics and Statistics, MIT Press, vol. 93(3), pages 748-763, August.
- James J. Choi & David Laibson & Brigitte C. Madrian, 2005. "$100 Bills on the Sidewalk: Suboptimal Investment in 401(k) Plans," NBER Working Papers 11554, National Bureau of Economic Research, Inc.
- Rockenbach, Bettina, 2004. "The behavioral relevance of mental accounting for the pricing of financial options," Journal of Economic Behavior & Organization, Elsevier, vol. 53(4), pages 513-527, April.
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