Cognition, Optimism, and the Formation of Age-Dependent Survival Beliefs

Nils Grevenbrock, Max Groneck, Alexander Ludwig, Alexander Zimper*

*Corresponding author for this work

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Abstract

This article investigates the roles of psychological biases for deviations between subjective survival beliefs (SSBs) and objective survival probabilities. We model these deviations through age-dependent inverse S-shaped probability weighting functions. Our estimates suggest that implied measures for cognitive weakness increase and relative optimism decrease with age. Direct measures of cognitive weakness and optimism share these trends. Our regression analyses confirm that these factors play strong quantitative roles in the formation of SSBs. Our main finding is that cognitive weakness instead of optimism becomes with age an increasingly important contributor to the well-documented overestimation of survival chances in old age.

Original languageEnglish
Pages (from-to)887-918
Number of pages32
JournalInternational Economic Review
Volume62
Issue number2
Early online date2-Dec-2020
DOIs
Publication statusPublished - May-2021

Keywords

  • SUBJECTIVE PROBABILITIES
  • LIFE EXPECTANCY
  • PROSPECT-THEORY
  • MORTALITY EXPECTATIONS
  • PREDICTIVE-VALIDITY
  • RISK PERCEPTION
  • HEALTH
  • MODEL
  • INCOME
  • UNCERTAINTY

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