"[I]ndividuals have difficulty valuing annuities, and this difficulty -- rather than a preference for lump sums -- can help explain observed low levels of annuity purchases. Although the median price at which people are willing to sell an annuity is close to median actuarial values, ... people are willing to pay substantially less to buy a larger annuity, a result not due to liquidity constraints or endowment effects. Strikingly, [the authors] also learn that individual responses to the buy versus sell decisions are negatively correlated, an effect that is stronger for the less financially sophisticated[.]" [WP2013-01]  MORE >>