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Optimal Design of Pension Funds : A Mission Impossible

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Listed:
  • Suijs, J.P.M.

    (Tilburg University, School of Economics and Management)

  • De Waegenaere, A.M.B.

    (Tilburg University, School of Economics and Management)

  • Borm, P.E.M.

    (Tilburg University, School of Economics and Management)

Abstract

Nowadays many employers offer their employees the possibility of an insurance against too large losses in income when retiring or becoming disabled. This paper models the optimization problem of the employer when setting up such a so-called pension fund. Not surprisingly, it turns out that the optimal solution depends on the premium the employees are willing to pay at most for such an insurance. Since this is private information for an employee and hence not known to the employer, he needs to collect information regarding these maximum premiums. It is shown that if employees' characteristics only differ in the maximum premium they are willing to pay, the employer is unable to perfectly inform himself on these maximum premiums, i.e. he cannot create the right incentives for his employees to reveal their maximum premiums truthfully. Copyright Springer-Verlag Berlin Heidelberg 2003
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Suijs, J.P.M. & De Waegenaere, A.M.B. & Borm, P.E.M., 1998. "Optimal Design of Pension Funds : A Mission Impossible," Other publications TiSEM ccc7c4fa-fdf8-4276-8d5c-6, Tilburg University, School of Economics and Management.
    • Handle: RePEc:tiu:tiutis:ccc7c4fa-fdf8-4276-8d5c-6c0c77fced68
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    References listed on IDEAS

    as
    1. Jackson, Matthew O, 1991. "Bayesian Implementation," Econometrica, Econometric Society, vol. 59(2), pages 461-477, March.
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    More about this item

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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