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Using prize draws as an incentive

February 7, 2017 Ravi Dutta and Sasha Lord

Businesses and academics have long known that lotteries and prize draws can be a cheap and effective way of encouraging behaviour – witness the number of surveys that offer a prize for completion. However, despite this well-worn tradition of using prize-draws, governments have traditionally focused on more blunt subsidies or penalties, and have been less keen to adopt this method – though this appears to be changing.

Some countries have used purchase receipts as de facto lottery tickets – by encouraging citizens to demand receipts when they complete a transaction, they force businesses to declare income and pay the correct amount of sales tax. Similarly, the Behavioural Insights Team (BIT) has found that using a lottery was an effective way to increase the number of voter registrations.

And in Australia, we have undertaken a programme of work with BreastScreen Victoria to test different ways of encouraging women who had not previously responded to two postal invitations. We found that a letter including a prize draw was more effective than a behaviourally informed letter alone. The highest rate of bookings was for a letter that included a pro-social twist: recipients were told that they could give the prize to a valued other person, but there was no statistically significant difference between this and the standard prize draw letter.

A more recent example of this is some of the work that BIT conducted with the Yarra Ranges Council in Victoria, Australia. There was significant interest in using behavioural insights to improve a range of service and processes, including encouraging ratepayers to pay their rates in full and on time. Paying rates in full (as opposed to by instalments) reduces administrative costs for the council, and receiving the money on time has significant cash-flow and interest benefits. The team at BIT worked with the council to develop a prize draw that acted as an incentive for early payment. Legislative restrictions meant that it was not possible to randomly allocate some ratepayers to receive the treatment – however, given the strong theoretical underpinnings of the intervention, the decision was taken to roll out the intervention to all properties.

One interesting feature of the intervention with Yarra Ranges Council is that the prizes were all locally themed – they included a dinner and accommodation package in the Yarra Valley, a hot air balloon ride with champagne and a hamper of local products. These were designed not only to act as attractive prizes but to draw on a sense of community and local connection with ratepayers. It was also, to our knowledge, the first time a council had implemented such a scheme in Victoria.

The intervention appears to have been successful. There was an increase from 5.7 per cent (3683) of properties paying early in the previous year, to 9.9 per cent (6371) of properties paying early this year – an increase of over 70 per cent Interestingly, while there were many properties that paid early for the first time this year, some properties that paid early the year before did not do the same this year. After accounting for those who ceased paying early and those whose payment behaviour did not change, there was a net increase of over $5 million in early payments made.

One of the downsides of doing a full rollout is that we can’t be entirely sure whether the reason more people paid early (and some people stopped paying early) was due to our intervention. We also don’t know whether the fact that the prizes were focused on the area was important to ratepayers. However, the substantial growth in early payments is strongly suggestive of the overall effectiveness of a prize draw.

Although it was not possible to run a full randomised controlled trial (RCT), it is still important to conduct an evaluation when applying new ideas or applying existing ideas in a different context. The strong theoretical underpinning, combined with the results of this trial,  demonstrate that prize draws can be a remarkably effective and low-cost way of changing behaviour. However, an RCT would allow greater understanding of what kinds of prizes work best in this context, and would also enable more precise identification of the magnitude of the effect.

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