Defined terms for the annuity market and lifetime income landscape.
Loss aversion is the tendency for individuals to weight losses more heavily than equivalent gains, so that avoiding a potential loss produces stronger motivation than pursuing a gain of the same size.
Mental accounting is the practice of treating money differently depending on where it is held, where it came from, or what it is intended for, rather than treating all resources as fungible.
Myopic loss aversion is the pattern in which loss-averse individuals evaluate risky positions more frequently than the time horizon of the position warrants, producing overreaction to short-term losses in decisions whose relevant horizon is long.
Narrow framing is the practice of treating a single decision in isolation from the broader portfolio or lifetime context of decisions it belongs to, so gains and losses in that one decision are evaluated on their own rather than pooled with related outcomes.
Nudge theory is the proposition that decisions can be systematically influenced through choice architecture changes that make particular selections more likely without restricting other options or changing their economic payoffs.
