Abstract

We designed a natural-field experiment in the context of local public transportation to test whether rewards in the form of lottery prizes coupled with traditional sanctions efficiently reduce free-riding. We organized a lottery in a medium-size Italian city the participation in which is linked to purchasing an on-board bus ticket. The lottery was then implemented in half of otherwise identical buses operating in the municipality. Our theoretical model shows that the introduction of the lottery generates an increase in the number of tickets sold and that it is possible to design a self-financing lottery. To estimate the effect of the lottery's introduction on the amount of tickets sold, we matched and compared treated and control buses operating on the same day on the exact same route. The results show that buses participating in the lottery sold significantly more tickets than the control buses. The increase in revenue from the tickets sold was more than the lottery prize amount.