Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/203286
Authors: 
Groneck, Max
Ludwig, Alexander
Zimper, Alexander
Year of Publication: 
2015
Series/Report no.: 
SAFE Working Paper 73
Abstract: 
Based on a cognitive notion of neo-additive capacities reflecting likelihood insensitivity with respect to survival chances, we construct a Choquet Bayesian learning model over the life-cycle that generates a motivational notion of neo-additive survival beliefs expressing ambiguity attitudes. We embed these neo-additive survival beliefs as decision weights in a Choquet expected utility life-cycle consumption model and calibrate it with data on subjective survival beliefs from the Health and Retirement Study. Our quantitative analysis shows that agents with calibrated neo-additive survival beliefs (i) save less than originally planned, (ii) exhibit undersaving at younger ages, and (iii) hold larger amounts of assets in old age than their rational expectations counterparts who correctly assess their survival chances. Our neo-additive life-cycle model can therefore simultaneously accommodate three important empirical findings on household saving behavior.
Subjects: 
Bayesian learning
likelihood insensitivity
ambiguity
Choquet expected utility
dynamic inconsistency
life-cycle hypothesis
saving puzzles
JEL: 
D91
D83
E21
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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