Do lottery payments induce savings behavior? Evidence from the lab

Emel Filiz-Ozbay, Jonathan Guryan*, Kyle Hyndman, Melissa Kearney, Erkut Y. Ozbay

*Corresponding author for this work

Research output: Contribution to journalArticle

8 Scopus citations

Abstract

This paper presents the results of a laboratory experiment designed to investigate whether the option of a Prize Linked Savings (PLS) product alters the likelihood that subjects choose to delay payment. By comparing PLS and standard savings products in a controlled way, we find strong evidence that a PLS payment option leads to greater rates of payment deferral than does a straightforward interest payment option of the same expected value. The appeal of the PLS option is strongest among men and self-reported lottery players. We use the results of our experiment to structurally estimate the parameters of the decision problem governing time preference, risk aversion, and probability weighting. We employ the parameter estimates in a series of policy simulations that compare the relative effectiveness of PLS products as compared to standard savings products.

Original languageEnglish (US)
Pages (from-to)1-24
Number of pages24
JournalJournal of Public Economics
Volume126
DOIs
StatePublished - Dec 2 2015

Keywords

  • Lotteries
  • Prelec weighting
  • Prize Linked Savings
  • Risk preferences

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

Fingerprint Dive into the research topics of 'Do lottery payments induce savings behavior? Evidence from the lab'. Together they form a unique fingerprint.

  • Cite this