Market Evidence of Misperceived Prices and Mistaken Mortality Risks / Jay Bhattacharya, Dana Goldman, Neeraj Sood.

Format:

Book

Author/Creator:

Bhattacharya, Jay.

Contributor:

National Bureau of Economic Research.

Goldman, Dana.

Sood, Neeraj.

Series:

Working Paper Series (National Bureau of Economic Research) no. w9863.

NBER working paper series no. w9863

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2003.

Summary:

We construct and implement a test of rational consumer behavior in a highstakes financial market. In particular, we test whether consumers make systematic mistakes in perceiving their mortality risks. We implement this test using data from secondary life insurance markets where consumers with a lifethreatening illness sell their life insurance policies to firms in return for an up-front payment. We compare predictions from two models: one with consumers who correctly perceive their mortality risk, and one with consumers who are misguided about their life expectancy, and find that our data are most consistent with the predictions made by the second model.

Notes:

Print version record

July 2003.