Abstract
This paper provides a simple two‐period, game theoretic set‐up with heterogeneous agents to analyse individual selection of a pension scheme by different categories of agents. Agents have been differentiated according to their income variability. We describe Bayesian equilibria and provide examples to illustrate. The design of a pension scheme requires the consent of all the population, and we have shown that differences of volatility of income contribute to the divergence regarding the decision of a pension investment alternative. We also provide support for the subsistence of unfunded scheme in economies with demographic aging and with promising returns in funded alternatives.
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