The halo effect, private knowledge and retirement fund choice: A theoretical model for the case of México’s Afores

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Universidad de Guadalajara

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Empirical evidence shows that Mexican workers frequently chose a lower-yielding retirement savings manager over a higher-yielding one, damaging their prospects for retirement income. This research paper shows that such puzzling behavior can occur as a product of the unobservable private history between workers and the companies clustered around a common brand-name, in an example of what is known as the halo effect. To support this hypothesis, a theoretical model of private knowledge and subjective probability with long-term commitment is built. Results are consistent with the idea that private-knowledge-induced halo effect can produce a rational decision process to yield an apparently irrational outcome.

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Halo effect, retirement, private knowledge, AFORE

Citación

Rodríguez-Reyes, L. R. (2018). The halo effect, private knowledge and retirement fund choice: A theoretical model for the case of Mexico’s Afores. En EconoQuantum, 15 (2): 7-20.