This post is jountly authored by Martina Björkman Nyqvist, Lucia Corno, Damien de Walque and Jakob Svensson.
Conditional cash transfers (CCTs) and other types of financial incentives have been used successfully to promote activities that are beneficial to the participants such as school attendance and health check-ups for children. CCTs pay a certain amount if the condition is verified.
Lotteries can also be used as an incentive. Instead of being paid a certain amount, the participants who satisfy the condition receive a lottery ticket, a random draw is performed among the tickets, and a predetermined number of winners earn a lottery prize. The value of the lottery prizes would be higher than the typical CCT amount, but the number of recipients of the prizes would be lower.
The use of lotteries as incentives in public health interventions is not unprecedented. One of the most well-known examples is the 1957 anti-Tuberculosis campaign in Glasgow. A blog post by Nathan Geffen reports that intense media coverage and a weekly prize draw resulted in a number of screenings almost three times higher than the initial aim of reaching 250,000 people. He also provides a link to a nice vintage video by British Pathé about the Glasgow anti-TB campaign. More recently, the HIV screening lottery, developed by ideas42, in the Western Cape Province in South Africa applied the same idea to promote HIV testing and was quite controversial, mainly for political reasons.
The advantages of lottery incentives linked to behavioral economics
Introducing a gamble into an otherwise standard financial incentive program has at least two potential advantages, especially if the program tries to prevent risky behaviors. First, with lotteries the program becomes relatively more attractive to individuals that are willing to take monetary risks. It might be that people who love risk when it comes to money are also more likely to take risks and gamble with their health. They might be more likely to smoke, to drink, to take drugs or engage in risky sex. If this is true, for example in the case of risky sexual behavior, which is responsible for the vast majority of new HIV infections, lottery incentives may then better target those at higher risk of getting infected by HIV.
Second, there is growing evidence from psychology and behavioral economics that people tend to overestimate small percentages, and therefore prefer a small chance at a large reward to a small reward for sure (Kahneman and Tversky, 1979, Kahneman, 2011, Barberis, 2013). If so the perceived return from participating in a gamble (lottery) is higher than the return from an incentive program that pays the expected return with certainty, or likewise lotteries may provide stronger incentives for behavioral change compared to a traditional CCT holding the budget constant.
Lotteries as incentives for HIV prevention
Financial incentives have been tested in the sexual domain to incentivize safe sex and prevent HIV and other sexually transmitted infections (STIs) (Kohler and Thornton 2012; Baird et al. 2012; de Walque et al. 2012; Galárraga et al. 2013). While some of these studies have shown promising impacts on the prevalence of sexually transmitted infections (STIs) or HIV, none so far demonstrated an impact on HIV incidence, the rate of new infections.
We used lotteries to design a financial incentive program aimed at HIV prevention in Lesotho: the lottery offered relatively low expected payments but high prizes conditional on negative STI test results.
As sexually transmitted infections (STIs) can be viewed as markers for risky sexual behaviors, our intervention aimed at modifying the trade-off between the benefit and costs of unprotected sex. If individuals’ decisions on sexual behavior ignore the health externality of risky sexual behavior, such a transfer program can be justified by the negative externalities generated by a higher number of HIV positive individuals within a society.
The study was a parallel group randomized trial. It had three separate arms – a control arm (N= 1208) and two intervention arms (859 in a low-value lottery arm and 962 in a high-value lottery arm). In the low-value lottery arm individuals were eligible to win lottery prizes worth 500 malotis/South African rands, or approximately $50 every four months. In the high-value lottery arm individuals were eligible to win lottery prizes of twice that amount.
Individuals in the intervention arms were awarded a lottery ticket if they tested negative for two curable STIs (syphilis and trichomoniasis) in the week before the lottery draw. In expected terms, and conditional on being STI negative, the lottery paid $3.3 every four months in the low-value lottery intervention group, $6.6 in the high-value lottery intervention group. Village level lotteries were organized every four months and 4 lottery winners (one male and one female per lottery arm) per village were drawn.
Individuals in the intervention arms testing positive for any of the two STIs did not receive a lottery ticket. They could, however, continue as study participants and thus become eligible in subsequent rounds. Individuals in the control arm were not eligible for lottery tickets, but all other study procedures were identical between the control and intervention arms. Anyone testing positive for an STI (regardless of arm) was offered counseling and free STI treatment and individuals testing positive for HIV were referred to public health clinics offering AIDS treatment for appropriate follow-up.
In a recent working paper, we report that overall, the lottery incentives had a significant impact in reducing HIV incidence, the rate of new HIV infections among participants who were HIV negative at baseline. Over the two year trial period, the HIV incidence rate was reduced by 2.5 percentage points, or 21.4%, leading to a 3.4 percentage points lower HIV prevalence rate at the end of the trial, in the pooled intervention compared to the control group. To the best of our knowledge, this is the first HIV prevention intervention focusing on sexual behavior changes (as opposed to medical interventions) to have been demonstrated to lead to a significant reduction in HIV incidence, the ultimate objective of any HIV prevention intervention.
Do risk-lovers like lotteries?
We further explored whether individuals with preferences for risk, based on the perceived value of a risky gamble, are more likely than risk-averse individuals to respond to a prevention scheme with a high but uncertain return conditional on behavioral change. Participants’ preference for risk were measured using a hypothetical risk aversion question in the baseline questionnaire: 62% of the participants report they would prefer a fixed amount of money below the expected value of a lottery instead of taking part in the lottery (risk-averse), while 38% are risk-loving. At baseline, risk-averse and risk-loving individuals had similar demographic and socioeconomic characteristics, but risk-loving participants were less likely to report that they practice safe sex and more likely to be HIV or STI positive.
Did risk-loving individuals respond differently than risk-averse individuals to the lottery program? Our results suggest they did. HIV incidence was 12.3 percentage points higher for risk-loving compared to risk averse individuals in the control group. HIV incidence among risk-lovers was however 12.2 percentage points lower in the intervention relative the control group: an effect size of 58% in this sub-group. The treatment effect for risk-averse participants was insignificant and the point estimate close to zero, implying that we cannot rule out that the observed decrease in HIV incidence in the pooled intervention compared to the control group was driven solely by the changed behavior of risk-loving individuals.
The practical advantages of lottery incentives
In addition to targeting the individuals most at risk, the use of lotteries has also practical advantages which are important if we consider scaling-up such programs. First, the administrative costs of a lottery program are likely to be lower compared to a traditional CCT program as only winners need to be paid. Second, we could think of a lottery system whereby only a fraction of the study participants are tested, reducing the cost of testing, an important fraction of the total cost. While the research and ethical protocol for the Lesotho study required that all project participants were offered testing, the incentive for behavioral change will, under certain conditions, remain the same if only lottery winners are tested or if STI screening also is subject to a lottery.
Martina Björkman Nyqvist is Assistant Professor at the Stockholm School of Economics.
Lucia Corno is Assistant Professor in Economics at the School of Business and Management, Queen Mary University, London.
Damien de Walque is Senior Economist in the Development Research Group at the World Bank.
Jakob Svensson is Professor at the Institute for International Economic Studies, Stockholm University.