Yue Li from University at Albany, State University of New York will present "Designing Social Security Claiming Incentives:
Experimental Evidence" joint work with John Duffy.

Abstract:
This paper employs laboratory experiments to evaluate policy proposals that advocate to use lump sum payments to reward delayed claims. Our experimental data reveals that replacing a greater annuity with a lump sum payment prompts participants to claim Social Security benefits about one year earlier, contrary to the rational choice model prediction of no change. Moreover, subjects in most periods underconsume in comparison to theoretical predictions conditional on both the claiming age and the starting assets in the current period. To explain these deviations from rational choice predictions, we develop a random attention model that assumes agents adopt a heuristic rule, occasionally allocating random attention to solving the intertemporal problem. The model also integrates misperceptions about continuation probabilities. We estimate this model by matching participants’ consumption decisions and validate it through out-of-sample predictions and comparisons with non-targeted data outcomes, such as the distribution of the claiming age and median expected lifetime utility.