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Annuity Markets$
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Edmund Cannon and Ian Tonks

Print publication date: 2008

Print ISBN-13: 9780199216994

Published to Oxford Scholarship Online: January 2009

DOI: 10.1093/acprof:oso/9780199216994.001.0001

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Annuity demand theory

Annuity demand theory

(p.140) 7 Annuity demand theory
Annuity Markets

Edmund Cannon (Contributor Webpage)

Ian Tonks (Contributor Webpage)

Oxford University Press

This chapter discusses Yaari's (19665) annuitization result, which states that a risk-averse individual concerned about longevity risk (uncertain length of life) will always purchase actuarially-fair annuity contracts, enabling them to smooth consumption in every period of retirement. The chapter explains the assumptions behind this result. It models the demand for annuities in an expected utility framework, and demonstrates the value of annuities under various specifications of preferences.

Keywords:   Yaari, complete annuitization, consumption smoothing, exotic utility functions

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