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Optimal Design of Pension Funds: A Mission Impossible
Suijs,J.P.M. De Waegenaere,A.M.B. Borm,P.E.M.
Suijs,J.P.M.
De Waegenaere,A.M.B.
Borm,P.E.M.
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 atmost for the 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 in most cases the employer is unable to perfectly inform himself on thesemaximum premiums. So, he cannot create the right incentives for his employees to reveal their maximum premiums truthfully.
Description
Pagination: 28
Date
1998
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Publisher
Operations research
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25.pdf
Adobe PDF, 326.35 KB
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Keywords
pension funds, insurance, Bayesian implementation, C72 - Noncooperative Games, D81 - Criteria for Decision-Making under Risk and Uncertainty, D82 - Asymmetric and Private Information ; Mechanism Design
Citation
Suijs, J P M, De Waegenaere, A M B & Borm, P E M 1998 'Optimal Design of Pension Funds : A Mission Impossible' CentER Discussion Paper, vol. 1998-25, Operations research, Tilburg.
License
info:eu-repo/semantics/restrictedAccess