Life cycle saving decisions belong to the most complex financial decisions that we are faced with in our life. Psychologists have found that when making complex decisions people use short-cuts in the form of minimum requirements for particular attribute categories of choice options. This paper...

Introducing the concept of “belief entrepreneur”, this paper offers a novel framework of endogenous belief formation under fundamental uncertainty. We consider a generic setup in which individuals must choose between a tested approach (supplied by a “defender”) and a competing innovative...

There are many pathways explaining the relationship between socioeconomic status and health; one possibility is that some normally unobservable characteristic causes people to invest both in their financial well-being and their health. Here we consider the possibility that the decision making...

In many instances, both voters and politicians are imperfectly informed about which policies are optimal. We analyze politicians’ policy choice in such situations. A distinctive element of our analysis is that we investigate how the strategic sophistication of voters’ beliefs about...

Large variations in retirement wealth are common, with some households accumulating hundreds of thousands of dollars and others accumulating next to nothing. We examine to what extent formal planning or simple rules of thumb contribute to these differences in wealth accumulation. In particular,...

This paper studies pension design from a risk management point of view using a lexicographic loss aversion model. Interest in this model stems from the fact that it explains income expansion paths of equity and total savings particularly well. I find that all income groups are likely to benefit...

Large variations in retirement wealth are common, with some households accumulating hundreds of thousands of dollars and others accumulating next to nothing. We examine to what extent formal planning or simple rules of thumb contribute to these differences in wealth accumulation. In particular,...

We investigate the relationship between subjective probabilities of future stock market returns and decisions about stockholding. Specifically, we examine whether acting upon subjective probabilities is confined to individuals with high cognitive skills. We explore this question using data from...