"It could be you" - seduction by lotteries

"It could be you"

How our seduction by lotteries is being used to nudge and steer our behaviour. 

Has it ever crossed your mind exactly why lotteries are so successful? The probability of hitting the jackpot in the National Lottery is 1 in 14 million. That is a pretty slim chance of winning. And yet every week around 30 million people enter dreaming that they might become a millionaire, one of the only legal ways to get a life changing sum of money for a small outlay.  In the US, people spent an average of $200 per year on lottery tickets in 2010.[1] Notably, lottery expenditure is much higher amongst people with low incomes. And we have been attracted for hundreds of years too – the first known lottery in the UK – the ‘Million Adventure’ – was set up in 1694 by the government to pay for the Nine Years’ War against France.[2]

So beyond the obvious why do lotteries draw us in? Looked at through a ‘BE lens’ they work at a deep psychological level across a number of influences. These include:

  • Prospect theory: As Kahneman and Tversky proved with their prospect theory, people are generally bad at probabilities and tend to overweight tiny probabilities.
  • Availability bias plays a big role. This bias says that we tend to think events that are easy to imagine are more likely to happen. It is very easy to imagine what it must be like to win money and what you might do with it and there are lots of stories around of people winning millions.
  • People also suffer from “It could be me!” or “I could win!” syndrome, also known as optimism bias and ignore the far more likely scenario of simply losing a pound.
  • We also anchor to what we feel are our particular 'lucky numbers' when in reality every number has an equal chance of being drawn at random.

Beyond the National Lottery, lotteries have also been used on many occasions in varied settings to incentivise us and change behaviour successfully. Often they can work better than the usual fines and regulations. As Richard Thaler commented in a New York Times OpEd earlier this year “One way to encourage good behavior, […] is to make it fun.”[3]

Here are a few of our favourite uses of lotteries:

The fun theory’s speed camera lottery

The Speed Camera Lottery is devised so that drivers obeying the speed limit are also caught on camera and automatically entered into a lottery to win a prize. So rather than penalise drivers who break the speed limit (stick) it incentivises people to keep within the speed limit (carrot). It was devised by Kevin Richardson, Senior Producer at Nickelodeon in collaboration with DDB for Volkswagen. Trialled in Sweden in 2010, it won the Fun Theory competition.

Avoid peak rush hours and win

There has also been recent success with lotteries to relieve traffic congestion.

Professor Balaji Prabhakar, a computer scientist at Stanford University, has successfully trialled a scheme which allows those who shift their commute to off-peak hours to enter a daily lottery. Called CAPRI (Congestion and Parking Relief Incentives) it gives drivers a chance to win up to $50 in their paycheck and has been so popular it will soon be expanded to cover parking, to encourage people to park away from the busiest parking areas.[4]

Such changes have also improved quality of life for users – one worker had reduced her commute time from 25 minutes at peak time to just 7 minutes. By changing the behaviour of a few, you have a big impact on the many, since travel is more spaced out during the day – Prabhakar says “You don’t have to change everyone’s behaviour; in fact it’s better if you don’t.” And unlike congestion charging or fines, “incentives can be started incrementally and are voluntary” and require less infrastructure. There are no figures for costs, but with such small daily wins, they are unlikely to be high. There may also be a social norming effect since colleagues can observe each other’s ‘good behaviour’ (perhaps through bumper stickers to create an identity) and prize money wins.

Take the train in Singapore and win!

Not only has Prabhakar had local success in his workplace, but he was also invited to devise a similar scheme in Singapore to encourage people to travel on the city’s trains out of peak hours. He and his students designed a system which offered either fare discounts or lottery entry to travellers (the lottery was far more popular). The trial (run in January 2012) lowered rush hour numbers by over 10%. Singapore is now considering a full launch. 

Declare your taxes and win!

In China tax evasion is a considerable problem. So in the late 1990s, the Chinese government trialled a system called the Golden Tax Project which included ‘scratch and win’ lottery numbers printed on the back of receipts to increase business tax compliance by encouraging more customers to ask for receipts – bringing black economy activity into the mainstream. Although not foolproof, this experiment has helped to significantly raise business tax revenues to rates comparable with other developed countries and still operates today almost nationwide.[5]

Take a pill and win!

Lotteries have also been trialled successfully in order to improve medical adherence. People are notoriously bad at taking medication – they forget, or don’t like the side effects so avoid the medication. One pilot study run by researchers Kevin Volpp, George Loewenstein et al, conducted a smallscale experiment to see if they could use lotteries to improve medical adherence. They gave volunteers on warfarin medication a special pill box with a daily reminder feature. If volunteers opened up their pill box according to their prescription, they were entered into a daily lottery with a 1 in 5 chance of winning $10 and a 1 in 100 chance of winning $100 (pilot 1) or a 1 in 10 chance of winning $10 and a 1 in 100 chance of winning $100 (pilot 2). The results were encouraging. The mean proportion of incorrect pills taken fell from 22% before the trial to around just 2% for both pilots.[6]

‘Savings with a thrill’!

This brilliant tagline comes from the UK’s Premium Bond launch, back in 1956. Although they were first viewed as immoral, Premium Bonds have proved a very successful way to incentivise people to save – in 2007 40% of the UK population (23 million people) had some sort of savings holed up in a Premium Bond. And they have been successful in many other countries too – Latin America, Sweden, Japan, Germany to name a few. These Prize-Linked Savings (PLS) schemes help to combine the irrational attractiveness of a lottery with the rationality of plain-Jane savings. They are also attractive since ‘you have nothing to lose’ – loss aversion is avoided. Unlike gambling and lotteries, where if you don’t win, you lose the price of your ticket or amount wagered, with PLS schemes you don’t lose anything as you either save, or save and win. A recent study by researchers at the University of Sydney illustrated this attractiveness, finding that PLS schemes might increase total savings as well as reduce lottery spending. In an online experiment, over 500 respondents were each given $100 to invest. They could simply accept the sum as cash, invest in a traditional savings account, enter a lottery or invest into a PLS. The introduction of the PLS scheme increased savings into the PLS by 12% on average and was combined with reduced lottery expenditure. Notably this was most often seen in participants from low-income households.[7] These findings could be significant in societies where many do not even have adequate emergency savings[8], especially as PLS schemes are relatively simple to set up compared to government programmes.

Lotto mania?

So what other behaviours could we incentivise with a lottery? Anti-smoking? Go to the gym 3 days a week? Recycling? Use less than the neighbourhood household norm of energy (gas or electricity) each month?  Making monthly pension payments?

The possibilities are endless and ultimately can often be cheaper than price subsidies or creating the infrastructure required for a new regulatory and fines system or monitoring systems to ensure correct behaviour.

And let’s face it a lot more fun…go on, it could just be your turn[9]!

Crawford Hollingworth is the founder of The Behavioural Architects


[1] NASPL Sales figures

[2] 100,000 tickets were issued at £10 each although groups could form to purchase a ticket too. It offered 6% annual return for 15 years with prizes varying from £10 to £1,000 – a lot of money in those days. Tickets were kept in special chests with 18 locks!

[3] http://www.nytimes.com/2012/02/14/opinion/making-good-citizenship-fun.html?_r=0

[4] https://stanfordcapri.org/welcomeinfo.php

[5] Wan J (2008), The incentive to declare taxes and tax revenue: the lottery receipt experiment in China, paper prepared for the 64th Congress of the International Institute of Public Finance, University of Maastricht, The Netherlands and http://www.csmonitor.com/World/Asia-Pacific/2012/1003/How-China-got-businesses-to-pay-taxes-scratch-n-win-tickets

[6] A test of financial incentives to improve warfarin adherence http://www.ncbi.nlm.nih.gov/pmc/articles/PMC2635367/

[7] Atalay, K., Bakhtiar, F., Cheung, S., Slonim, R., “Savings and Prize-linked Savings Accounts” October 2012, IZA DP No. 6927

[8] Researchers Lusardi, Schneider and Tufano (2011) found that half of respondents to a US survey would not be able to raise $2000 for an unexpected emergency.

[9] NB: Gamblers Fallacy would suggest that just as if the ball on a roulette wheel lands on black five times in a row, odds are that it will land on red next time, if we've gone five months without winning anything in the National Lottery it must be our turn now.... mustn't it?

 

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