Optimal Design of Pension Funds

A Mission Impossible

Research output: Working paperDiscussion paperOther research output

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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.
Original languageEnglish
Place of PublicationTilburg
PublisherOperations research
Number of pages28
Volume1998-25
Publication statusPublished - 1998

Publication series

NameCentER Discussion Paper
Volume1998-25

Fingerprint

Employees
Pension funds
Employers
Premium
Insurance
Optimal solution
Optimization problem
Income
Incentives
Private information

Keywords

  • pension funds
  • insurance
  • Bayesian implementation

Cite this

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). Tilburg: Operations research.
Suijs, J.P.M. ; De Waegenaere, A.M.B. ; Borm, P.E.M. / Optimal Design of Pension Funds : A Mission Impossible. Tilburg : Operations research, 1998. (CentER Discussion Paper).
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Suijs, JPM, De Waegenaere, AMB & Borm, PEM 1998 'Optimal Design of Pension Funds: A Mission Impossible' CentER Discussion Paper, vol. 1998-25, Operations research, Tilburg.

Optimal Design of Pension Funds : A Mission Impossible. / Suijs, J.P.M.; De Waegenaere, A.M.B.; Borm, P.E.M.

Tilburg : Operations research, 1998. (CentER Discussion Paper; Vol. 1998-25).

Research output: Working paperDiscussion paperOther research output

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Suijs JPM, De Waegenaere AMB, Borm PEM. Optimal Design of Pension Funds: A Mission Impossible. Tilburg: Operations research. 1998. (CentER Discussion Paper).