Rectangularization of the survival probability seems to be an ongoing process. It results from a higher concentration of the ages at death; but it can be reversed by a continuous increase in the limit of life time. In this paper, we assume that these two factors are endogenous and we show that risk averse decision makers exhibit a bias towards rectangularization. More specifically, the importance of the bias depends upon the intensity of the "fear of ruin" which is another measure of the degree of absolute risk aversion.
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Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number
2007032.
Find related papers by JEL classification: D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)
LEROUX, Marie-Louise & PESTIEAU, Pierre & PONTHIéRE, GrŽgory, 2008.
"Should we subsidize longevity?,"
CORE Discussion Papers
2008058, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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