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Savings and prize-linked savings accounts

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  • Atalay, Kadir
  • Bakhtiar, Fayzan
  • Cheung, Stephen
  • Slonim, Robert

Abstract

Many households have insufficient savings to handle moderate and routine consumption shocks. Many of these financially fragile households also have the highest lottery expenditures as a proportion of income. This combination suggests that prize-linked savings (PLS) accounts, combining security of principal with lottery-type jackpots, can increase savings among these at-risk households. Results from an online experiment show that the introduction of PLS accounts increase total savings and reduce lottery expenditures significantly, especially among individuals with the lowest levels of savings and income. The results imply that PLS accounts offer a plausible market-based solution to encourage individuals to increase savings.

Suggested Citation

  • Atalay, Kadir & Bakhtiar, Fayzan & Cheung, Stephen & Slonim, Robert, 2014. "Savings and prize-linked savings accounts," Journal of Economic Behavior & Organization, Elsevier, vol. 107(PA), pages 86-106.
  • Handle: RePEc:eee:jeborg:v:107:y:2014:i:pa:p:86-106
    DOI: 10.1016/j.jebo.2014.07.015
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. How to increase savings: add a lottery!
      by Economic Logician in Economic Logic on 2013-09-30 19:55:00

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    More about this item

    Keywords

    Personal finance; Savings; Lotteries; Online experiment; Individual decision making;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

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