Adverse selection in the annuity market with sequential and simultaneous insurance demand
This paper investigates the effect of adverse selection on the private annuity market in a model with two periods of retirement and two types of individuals, who differ in their life expectancy. In order to introduce the existence of time-limited pension insurance, we consider a model where for each period of retirement separate contracts can be purchased. Demand for the two periods can be decided sequentially or simultaneously. We show that only a situation where all risk types choose sequential contracts is an equilibrium and that this outcome is favourable for the long-living, but is unfavourable for the short-living individuals. The Geneva Risk and Insurance Review (2006) 31, 111–146. doi:10.1007/s10713-006-0558-4
Volume (Year): 31 (2006)
Issue (Month): 2 (December)
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