MORTALITY RISK PERCEPTIONS - A BAYESIAN REASSESSMENT

This paper uses a Bayesian learning model to assess the respective inf luence of different risk measurements on mortality risk perceptions. P eople form risk beliefs using several sources of information, includin g the actual population mean death risk level, the discounted lost lif e expectancy, and the age-specific hazard rate considered by Benjamin and Dougan (1997). The appropriate criterion for judging the validity of risk perceptions is not the perfect information case, but rather wh ether people form their risk beliefs in a rational manner given a worl d of costly and limited risk information. Although the statistical res ults support the overall conclusion that the learning process is ratio nal, the character of the learning process differs depending on the ri sk level. Risk-related variables are much better predictors of larger risks than of small risks, which reflects the role of information cost s and the benefits of learning about larger risks.