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Savings and Prize-Linked Savings Accounts

Author

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  • Atalay, Kadir
  • Bakhtiar, Fayzan
  • Cheung, Stephen L.
  • 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 L. & Slonim, Robert, 2013. "Savings and Prize-Linked Savings Accounts," Working Papers 2013-12, University of Sydney, School of Economics.
    • Handle: RePEc:syd:wpaper:2123/9259
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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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    Cited by:

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    2. Felipe S. Iachan & Plamen T. Nenov & Alp Simsek, 2021. "The Choice Channel of Financial Innovation," American Economic Journal: Macroeconomics, American Economic Association, vol. 13(2), pages 333-372, April.
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    More about this item

    Keywords

    Individual Decision Making; Online Experiment; Lotteries; Savings; Personal Finance;
    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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