Ride Your Luck! A Field Experiment on Lottery-Based Incentives for Compliance

Abstract

In a field experiment, we studied the performance of an incentive scheme that combines a lottery-based reward for compliance with probabilistic sanctions for noncompliance. For one month, bus passengers who purchased a ticket on board a subset of buses operating in a medium-sized Italian city participated in a lottery awarding a €500 prize. The remaining buses—otherwise identical—were used as controls. We observed the amount of tickets sold on treated and control buses over three months, before, during, and after the introduction of the lottery. Results show that treated buses sold significantly more on-board tickets than control buses during the lottery period. In our setup, the estimated extra revenues from the ticket sales caused by the introduction of the lottery fell short of the amount of the total prizes raffled off. However, the incentive scheme proved cost-effective because not all the lottery prizes were claimed by winners. This paper was accepted by Uri Gneezy, behavioral economics.