Adverse selection in the annuity market with sequential and simultaneous insurance demand

This paper investigates the effect of adverse selection on the private annuity market in a model with two periods of retirement and two types of individuals, who differ in their life expectancy. In order to introduce the existence of limited-time pension insurance, we consider a model where for each period of retirement separate contracts can be purchased. Demand for the two periods can be decided either sequentially or simultaneously. We show that only a situation where all risk types choose sequential contracts can be an equilibrium and that this outcome is favourable for the long-living, but is unfavourable for the short-living individuals.