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Behavioral Impediments to Valuing Annuities: Complexity and Choice Bracketing
Review of Economics and Statistics
This paper examines two behavioral factors that diminish people's ability to value a lifetime income stream or annuity, drawing on a randomized experiment with about 4,000 adults in a U.S. nationally representative sample. We find that increasing the complexity of the annuity choice reduces respondents' ability to value the annuity, measured by the difference between the sell and buy values they assign to the annuity. When we limit narrow choice bracketing by inducing people to think firstdoi:10.1162/rest_a_00892 fatcat:ryoyo75ny5aqvad6tlnbtbrhga