Wharton Pension Research Council Working Papers

Document Type

Working Paper

Date of this Version



In this paper, we empirically analyze a market for annuity contracts. To this end, we use multi-stage and multi-attribute auctions, where life insurance companies that have private information about their annuitization costs compete for retirees' savings by o ffering pensions and bequests, and retirees choose \winners" that maximize their expected present discounted utilities. We establish the identification of our model parameters and estimate them using rich administrative data from Chile. Our estimates suggest that (i) retirees with lowest savings quintiles value firms' risk ratings (e.g., AAA, AA) the most, while the high savers do not; (ii) almost half the retirees who choose an annuity do not value bequest, and (iii) firms are more likely to have low annuitization cost for retirees in the top-two savings quintiles. Counterfactuals show that private information about costs harms only these high savers, and simplifying the current mechanism by using English auctions and \shutting-down" risk ratings lead to higher pensions in equilibrium, but only for the high savers.


Annuity Contract, Annuitization Costs, Auctions, Mortality

JEL Code

D14, D44, D91, C57, J26, L13

Working Paper Number



The project described received funding from the TIAA Institute.

Copyright/Permission Statement

The findings and conclusions expressed are those of the authors and do not necessarily represent official views of the TIAA Institute or TIAA, the Wharton School or the Pension Research Council. © 2021 Pension Research Council of the Wharton School of the University of Pennsylvania. All rights reserved.


We are thankful to Lee M. Lockwood, Leora Friedberg, Gaston Illanes and Fernando Luco for their helpful suggestions. We also thank the seminar/conference participants and discussants at SEA 2019, APIOC 2019, 2020 ES NAWM, NYU Stern, ES World Congress 2020 and INFORMS annual meeting 2020. Fajnzylber and Willington acknowledge financial support from CONICYT/ANID Chile, Fondecyt Project Number 1181960.

Included in

Economics Commons



Date Posted: 09 March 2021