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EconoQuantum

Print version ISSN 1870-6622

Abstract

RODRIGUEZ REYES, Luis Raúl. The halo effect, private knowledge and retirement fund choice: A theoretical model for the case of México’s Afores. EconoQuantum [online]. 2018, vol.15, n.2, pp.7-20. ISSN 1870-6622.  http://dx.doi.org/10.18381/eq.v15i2.7126.

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.

Keywords : Halo effect; retirement; private knowledge; AFORE; D82; G14; G41; H55; J26.

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