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URL:
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https://ub-madoc.bib.uni-mannheim.de/44855
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URN:
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urn:nbn:de:bsz:180-madoc-448551
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Document Type:
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Working paper
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Year of publication:
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2018
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The title of a journal, publication series:
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ZEW Discussion Papers
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Volume:
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18-015
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Place of publication:
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Mannheim
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Publication language:
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English
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Institution:
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Sonstige Einrichtungen > ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
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MADOC publication series:
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Veröffentlichungen des ZEW (Leibniz-Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
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Subject:
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330 Economics
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Classification:
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JEL:
D12 , D83 , I10,
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Keywords (English):
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Subjective survival beliefs , probability weighting function , confirmatory bias , cognition , optimism
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Abstract:
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This paper investigates the roles psychological biases play in empirically estimated 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 (PWFs), as documented in experimental prospect theory. Our estimates suggest that the implied measures for cognitive weakness, likelihood insensitivity, and those for motivational biases, 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. In particular, cognitive weakness is an increasingly important contributor to the overestimation of survival chances in old age.
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ZEW Discussion Papers
Mannheim
18-015
[Working paper]
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