On Uncertain Lifetimes
This paper contrasts consumer choice under uncertain lifetimes with the behavior that would arise if each individual's lifetime were announced at birth. In a model that includes life insurance and excludes investments in human capital, the expected utility under uncertain lifetimes exceeds that under known lifetimes when the latter expectation is based on preannouncement survival probabilities. This conclusion emerges, first, because the model without human capital contains no planning benefits from knowledge of the horizon and, second, because the prior announcement of lifetimes forces risk-averse consumers to undertake an extra gamble that they could otherwise avoid by using life insurance.
|Date of creation:||1977|
|Date of revision:|
|Publication status:||Published in Journal of Political Economy -Chicago-|
|Contact details of provider:|| Postal: Littauer Center, Cambridge, MA 02138|
Web page: http://www.economics.harvard.edu/
More information through EDIRC
References listed on IDEAS
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.:
- Hirshleifer, Jack, 1971. "The Private and Social Value of Information and the Reward to Inventive Activity," American Economic Review, American Economic Association, vol. 61(4), pages 561-74, September.
- Menahem E. Yaari, 1965. "Uncertain Lifetime, Life Insurance, and the Theory of the Consumer," Review of Economic Studies, Oxford University Press, vol. 32(2), pages 137-150.
When requesting a correction, please mention this item's handle: RePEc:hrv:faseco:3451301. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Office for Scholarly Communication)
If references are entirely missing, you can add them using this form.