Health Policy Commission
Two Boylston Street, Sixth Floor
Boston, MA 02116
NBER Working Papers and Publications
|May 2013||Framing Lifetime Income|
with Jeffrey R. Brown, Jeffrey R. Kling, Sendhil Mullainathan: w19063
We provide evidence that individuals optimize imperfectly when making annuity decisions, and this result is not driven by loss aversion. Life annuities are more attractive when presented in a consumption frame than in an investment frame. Highlighting the purchase price in the consumption frame does not alter this result. The level of habitual spending has little interaction with preferences for annuities in the consumption frame. In an investment frame, consumers prefer annuities with principal guarantees; this result is similar for guarantee amounts below, at, and above the purchase price. We discuss implications for the retirement services industry and its regulators.
Published: Framing Lifetime Income Jeffrey R. Brown, Jeffrey R. Kling, Sendhil Mullainathan, and Marian V. Wrobel The Journal of Retirement Summer 2013, Vol. 1, No. 1: pp. 27-37 DOI: 10.3905/jor.2013.1.1.027 Framing Lifetime Income
|September 2011||Comparison Friction: Experimental Evidence from Medicare Drug Plans|
with Jeffrey R. Kling, Sendhil Mullainathan, Eldar Shafir, Lee Vermeulen: w17410
Consumers need information to compare alternatives for markets to function efficiently. Recognizing this, public policies often pair competition with easy access to comparative information. The implicit assumption is that comparison friction--the wedge between the availability of comparative information and consumers' use of it--is inconsequential because information is readily available and consumers will access this information and make effective choices. We examine the extent of comparison friction in the market for Medicare Part D prescription drug plans in the United States. In a randomized field experiment, an intervention group received a letter with personalized cost information. That information was readily available for free and widely advertised. However, this additional step--p...
Published: Quarterly Journal of Economics, 127:1 (February 2012), 199-235. citation courtesy of
|January 2008||Why Don't People Insure Late Life Consumption: A Framing Explanation of the Under-Annuitization Puzzle|
with Jeffrey R. Brown, Jeffrey R. Kling, Sendhil Mullainathan: w13748
Rational models of risk-averse consumers have difficulty explaining limited annuity demand. We posit that consumers evaluate annuity products using a narrow "investment frame" that focuses on risk and return, rather than a "consumption frame" that considers the consequences for lifelong consumption. Under an investment frame, annuities are quite unattractive, exhibiting high risk without high returns. Survey evidence supports this hypothesis: whereas 72 percent of respondents prefer a life annuity over a savings account when the choice is framed in terms of consumption, only 21 percent of respondents prefer it when the choice is framed in terms of investment features.
Published: Jeffrey R. Brown & Jeffrey R. Kling & Sendhil Mullainathan & Marian V. Wrobel, 2008. "Why Don’t People Insure Late-Life Consumption? A Framing Explanation of the Under-Annuitization Puzzle," American Economic Review, American Economic Association, vol. 98(2), pages 304-09, May. citation courtesy of