The considerable heterogeneity in economic resources at retirement could be partly due to variations in individuals' expectations and how those expectations influence economic decision-making behavior, e.g., with respect to retirement planning. Yet, how individuals form expectations about future events is very little understood. Because of inadequate data, researchers studying individual decision-making have only been able to make assumptions about the expectation formation process. This project collects new data through the existing RAND Internet Panel to study directly the process of individual expectation formation and how it relates to economic decision-making. The project includes experiments to define the role of information and uncertainty and their interaction with cognitive abilities, motivational and personality related variables in how individuals form expectations and revise them, with special emphasis on expectations about Social Security benefits. With the new data, this project describes subjective distributions of individuals' expectations about future Social Security benefits and other events related to retirement planning in cross-section and in panel, and identifies the role and relative importance of the different sources of uncertainty about Social Security benefits. This project seeks to describe how individuals vary in the way they revise their expectations in response to new information or events. The findings will be combined to draw implications with respect to the methodological aspects of eliciting expectations in general purpose surveys and with respect to modeling expectation formation. Finally, this project will examine how revisions in expectations map into adjustments of actual behavior, and integrate observations on expectation formation into applications of models of economic decision-making. Reference to Public Health: At least some of the strong correlation between economic status and health is due to reduced access to health care services and an unhealthy environment which result from low levels of resources. Thus heterogeneity in economic resources at retirement could contribute importantly to health disparities among the elderly. This research will provide insights into how flawed expectations about Social Security benefits and other future events could lead to inadequate planning and inadequate economic resources at retirement with an implication for health disparities ? ? ?
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