Making Savers Winners: An Overview of Prize-Linked Saving Products

35 Pages Posted: 13 Nov 2010

See all articles by Melissa S. Kearney

Melissa S. Kearney

University of Maryland - Department of Economics; National Bureau of Economic Research (NBER)

Peter Tufano

Harvard Business School; University of Oxford, Said Business School

Jonathan Guryan

Northwestern University - Human Development and Social Policy (HDSP) Program; National Bureau of Economic Research (NBER)

Erik Hurst

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

Date Written: November 11, 2010

Abstract

For over three centuries and throughout the globe, people have enthusiastically bought savings products that incorporate lottery elements. In lieu of paying traditional interest to all investors proportional to their balances, these Prize Linked Savings (PLS) accounts distribute periodic sizeable payments to some investors using a lottery-like drawing where an investor’s chances of winning are proportional to one’s account balances. This paper describes these products, provides examples of their use, argues for their potential popularity in the United States - especially to low and moderate income non-savers - and discusses the laws and regulations in the United States that largely prohibit their issuance.

Keywords: lottery, prize, saving, accounts, income, products, households, gambling, investment

Suggested Citation

Kearney, Melissa S. and Tufano, Peter and Guryan, Jonathan and Hurst, Erik, Making Savers Winners: An Overview of Prize-Linked Saving Products (November 11, 2010). Pension Research Council WP 2010-36, Available at SSRN: https://ssrn.com/abstract=1707668 or http://dx.doi.org/10.2139/ssrn.1707668

Melissa S. Kearney (Contact Author)

University of Maryland - Department of Economics ( email )

College Park, MD 20742
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Peter Tufano

Harvard Business School ( email )

Soldiers Field Road
Morgan Hall 131
Boston, MA 02163
United States

University of Oxford, Said Business School

Park End Street
Oxford, OX1 1HP
Great Britain

Jonathan Guryan

Northwestern University - Human Development and Social Policy (HDSP) Program ( email )

2046 Sheridan Road
Evanston, IL 60208
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Erik Hurst

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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