Do lottery payments induce savings behavior? Evidence from the lab

Filiz‐Ozbay, Emel; Guryan, Jonathan; Hyndman, Kyle; Kearney, Melissa S.; Özbay, Erkut Y.

doi:10.1016/j.jpubeco.2015.02.007

Cited by 59 publications

(14 citation statements)

References 66 publications

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“…Prospect theory probability weighting is also the motivation behind prize-linked savings products that are generally illegal in the United States but that have a long history and some popularity in other counties where they are allowed (Kearney et al 2010). Whether prizelinked savings products actually increase savings is an open empirical question, although one recent paper finds suggestive evidence from a laboratory experiment that lottery-like payouts lead to greater consumption deferrals than do standard linear interest rates (Filiz-Ozbay et al 2013). …”

Section: Behaviorally Informed Incentivesmentioning

confidence: 99%

Applying Insights from Behavioral Economics to Policy Design

Madrian¹

2014

100

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The premise of this article is that an understanding of psychology and other social science disciplines can inform the effectiveness of the economic tools traditionally deployed in carrying out the functions of government, which include remedying market failures, redistributing income, and collecting tax revenue. An understanding of psychology can also lead to the development of different policy tools that better motivate desired behavior change or that are more cost-effective than traditional policy tools. The article outlines a framework for thinking about the psychology of behavior change in the context of market failures. It then describes the research on the effects of a variety of interventions rooted in an understanding of psychology that have policy-relevant applications. The article concludes by discussing how an understanding of psychology can also inform the use and design of traditional policy tools for behavior change, such as financial incentives.

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Section: Behaviorally Informed Incentivesmentioning

confidence: 99%

Applying Insights from Behavioral Economics to Policy Design

Madrian¹

2014

100

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“…In a laboratory experiment, Filiz-Ozbay et al (2015) find that a prize-based incentive makes subjects more willing to defer payment to a later date than an equivalent expected value fixed interest rate. Atalay et al (2014) conduct an online experiment and find that introducing a prize-linked savings product to a budget allocation task both increases savings and reduces lottery expenditures.…”

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confidence: 98%

Behavioral Household Finance

Beshears

Choi

Laibson

et al. 2018

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This chapter provides an overview of household finance. The first part summarizes key facts regarding household financial behavior, emphasizing empirical regularities that are inconsistent with the standard classical economic model and discussing extensions of the classical model and explanations grounded in behavioral economics that can account for the observed patterns. This part covers five topics: consumption and savings, borrowing, payments, asset allocation, and insurance. The second part addresses interventions that firms, governments, and other parties deploy to shape household financial outcomes: education and information, peer effects and social influence, product design, advice and disclosure, choice architecture, and interventions that directly target prices or quantities. This chapter is divided into two parts, each of which is further divided into several sections. The first part summarizes key facts regarding household financial behavior, emphasizing empirical regularities that are inconsistent with the standard classical economic model and discussing both extensions of the classical model and explanations grounded in behavioral economics that can account for the observed patterns. This part covers five topics: (I) consumption and savings, (II) borrowing, (III) payments, (IV) asset allocation, and (V) insurance. The second part addresses interventions that firms, governments, and other parties deploy to shape household financial outcomes: (VI) education and information, (VII) peer effects and social influence, (VIII) product design, (IX) advice and disclosure, (X) choice architecture, and (XI) interventions that directly target prices or quantities. The final section of the paper (XII) concludes. John BeshearsWe offer broad coverage of the household finance literature, but we limit the scope of our discussion along some dimensions. We focus on the U.S. institutional context and on empirical work based on U.S. data, although we do bring evidence from other wealthy countries to bear when germane and occasionally reference evidence from developing countries. We address household asset allocation but do not draw out its implications for asset pricing, which are covered by the asset pricing chapter in this handbook. Although household decisions regarding health care are relevant to household finance, we largely omit this literature from our chapter because it is covered in depth in the chapter on behavioral health economics. Finally, there is some overlap between our section on financial product design and the chapter on behavioral industrial organization; we refer readers to that chapter for related material on that topic. Part 1: Facts I. Consumption and SavingsBeginning with the seminal work of Modigliani and Brumberg (1954) and Friedman (1957), economists have embraced the view that households choose to save and borrow to smooth consumption over the lifecycle. Intuitively, if agents have concave utility functions over consumption, then they should spread consumption across time to optimally...

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“…Another approach has been prize-linked savings (PLS). The PLS approach uses accounts that reward account holders using a lottery-like drawing in which the chance of winning is proportional to the balance in the account (Filiz-Ozbay et al, 2015; Kearney et al, 2010). The goal of these accounts is to capitalize on the appeal of gambling to incentivize people to invest in their personal savings account.…”

Section: Prior Efforts Informed By Psychologymentioning

confidence: 99%

“…The goal of these accounts is to capitalize on the appeal of gambling to incentivize people to invest in their personal savings account. Research has shown that these tools are most appealing to men, lottery players, and individuals with relatively low account balances (Atalay et al, 2014; Filiz-Ozbay et al, 2015). Although most evidence supporting PLS stems from lab and online experiments, this work still suggests that these accounts may be a partial solution to encourage individual investment in personal savings.…”

Section: Prior Efforts Informed By Psychologymentioning

confidence: 99%

Promoting Savings for Financial Resilience: Expanding the Psychological Perspective

Hall

2021

Curr Dir Psychol Sci

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In the United States, the lack of personal savings has been a perennial concern in the world of public policy. Policymakers and other practitioners constantly struggle with how to encourage families to accumulate funds in preparation for inevitable, but often unpredictable, financial emergencies. The field of applied behavioral science has attempted to address this challenge—often with mixed or modest results. I argue that psychological science (personality and social psychology in particular) offers underappreciated insights into the design and implementation of policy interventions to improve the rate of individual savings. In this article, I briefly discuss examples of prior interventions that have attempted to increase saving and then lay out some opportunities that have not been deeply explored. Future research in this area should broaden and deepen the way that psychology is leveraged as a tool to improve the financial security of the people who are the most vulnerable.

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Do lottery payments induce savings behavior? Evidence from the lab

Cited by 59 publications

References 66 publications

Applying Insights from Behavioral Economics to Policy Design

Applying Insights from Behavioral Economics to Policy Design

Behavioral Household Finance

Promoting Savings for Financial Resilience: Expanding the Psychological Perspective

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