We use data on annuities to study and evaluate an imperfectly competitive market where firms have private information about their (annuitization) costs. Our data is from Chile, where the market is structured as first-price-auction-followed-by-bargaining, and where each retiree chooses a firm and an annuity contract to maximize her expected present discounted utility. We find that retirees with low savings have the highest information processing cost, and they also care about firms' risk-ratings the most. Furthermore, while almost 50\% of retirees reveal that they do not value leaving bequests, the rest have heterogeneous preference for bequestthat, on average, increases with their savings. On the supply side, we find that firms ' annuitization costs vary across retirees , and the average costs increase with retirees' savings . If these costs were commonly known then the pensions would increase for everyone, but the increment would be substantial only for the high savers. Likewise, if we simplify the current pricing mechanism by implementing English auctions and "shutting down" the  risk-ratings , then the pensionswould increase, but again, mostly for the high savers.
The performance of a market for annuity contracts depends on the interaction between retirees and strategic life insurance companies with private information about their costs. We model this interaction using multi-stage and multi-attribute auctions where a retiree--auctioneer--maximizes herexpected present discounted utility. We estimate the model parameters using rich administrative data from Chile and find that retirees with low savings value firms' risk-ratings the most. The estimates also suggest that almost half the retirees who choose an annuity do not value bequest, and firms are more likely to have low annuitization cost for retirees in the top two savings deciles. Counterfactuals show that under the current mechanism, private information about costs harms only these high savers. Implementing English auctionsand prohibiting the use of risk-ratings lead to higher pensions, but only for these high savers.
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We use data on annuities to study and evaluate an imperfectly competitive market where firms have
The performance of a market for annuity contracts depends on the interaction between retirees and strategic life insurance companies with
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(annuitization) costs. Our data is from Chile, where the market is structured as first-price-auction-followed-by-bargaining, and where each retiree chooses a firm and an annuity contract to maximize her expected present discounted utility. We
costs. We model this interaction using multi-stage and multi-attribute auctions where a retiree--auctioneer--maximizes her
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expected present discounted utility
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. We estimate the model parameters using rich administrative data from Chile and
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have the highest information processing cost, and they also care about
value
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Furthermore, while almost 50\% of retirees reveal that they
The estimates also suggest that almost half the retirees who choose an annuity
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leaving bequests, the rest have heterogeneous preference for bequestthat, on average, increases with their savings. On the supply side, we find that firms ' annuitization costs vary across retirees , and the average costs increase with retirees' savings . If these costs were commonly known then the pensions would increase for everyone, but the increment would be substantial only for the
bequest, and firms are more likely to have low annuitization cost for retirees in the top two savings deciles. Counterfactuals show that under the current mechanism, private information about costs harms only these
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Likewise, if we simplify the current pricing mechanism by implementing English auctions and "shutting down" the
Implementing English auctions
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and
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prohibiting the use of
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, then the pensionswould increase, but again, mostly for the
lead to higher pensions, but only for these