𝔹𝕖𝕤𝕥 𝕀𝕟𝕤𝕦𝕣𝕒𝕟𝕔𝕖 ℙ𝕠𝕝𝕚𝕔𝕪

A LIFE CYCLE MODEL OF LIFE INSURANCE PURCHASES* BY STANLEY FISCHER1 1. INTRODUCTION Lifetime consumption models and portfolio decisions have been presented by Hokinson (2), Mossin (10), Samuelsson (11), Merton (9), David Lewahri and Srinivasan [6] and others. They either deal with an infinite horizon or with the date of death being known with certainty. Yaris (12) has studied the problem of uncertain life and life insurance in the context of the expected utility assumption using a continuous-time model. He describes the optimal paths of consumption and saving by means of two differential equations that must be satisfied along these paths, but he does not examine in detail the demand functions for consumption or insurance. Hokinson (3) has also considered the problem of consumption and portfolio choice under lifetime uncertainty, using a discrete-time model. In this paper we use a discrete-time model, essentially similar to Hokinson (3) in which the length of life is uncertain, t...