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.
|Place of Publication||Tilburg|
|Number of pages||28|
|Publication status||Published - 1998|
|Name||CentER Discussion Paper|
- pension funds
- Bayesian implementation