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Cognition, optimism and the formation of age-dependent survival beliefs

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  • Grevenbrock, Nils
  • Groneck, Max
  • Ludwig, Alexander
  • Zimper, Alexander

Abstract

This paper investigates the roles psychological biases play in deviations between subjective survival beliefs (SSBs) and objective survival probabilities (OSPs). We model deviations between SSBs and OSPs through age-dependent inverse S-shaped probability weighting functions. Our estimates suggest that implied measures for cognitive weakness and relative pessimism increase with age. We document that direct measures of cognitive weakness and motivational attitudes share these trends. Our regression analyses confirm that these factors play strong quantitative roles in the formation of subjective survival beliefs: cognitive weakness rather than optimism is an increasingly important contributor to overestimation of survival chances in old age.

Suggested Citation

  • Grevenbrock, Nils & Groneck, Max & Ludwig, Alexander & Zimper, Alexander, 2020. "Cognition, optimism and the formation of age-dependent survival beliefs," SAFE Working Paper Series 200, Leibniz Institute for Financial Research SAFE.
  • Handle: RePEc:zbw:safewp:200
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    Cited by:

    1. Cormac O'Dea & David Sturrock, 2019. "Survival pessimism and the demand for annuities," IFS Working Papers W19/02, Institute for Fiscal Studies.
    2. Nils Grevenbrock & Max Groneck & Alexander Ludwig & Alexander Zimper, 2021. "Cognition, Optimism, And The Formation Of Age‐Dependent Survival Beliefs," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 62(2), pages 887-918, May.

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    More about this item

    Keywords

    Subjective Survival Beliefs; Probability Weighting Function; Confirmatory Bias; Cognition; Optimism; Pessimism;
    All these keywords.

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • I10 - Health, Education, and Welfare - - Health - - - General

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