How a Dutch lottery ingeniously harnesses regret aversion by allocating

Imagine you’re a student. You’re offered a free lottery ticket with the chance to win a 15 euro book token. You’re shown the ticket, and you notice the number on it. Then you’re given the chance to swap that ticket for a different one. In return for swapping tickets, you’ll get a free gift - a pen embossed with your university’s name. Would you agree to exchange the tickets or not?

When students at Tilburg University in the Netherlands were given this choice only 56 per cent of them went for it, even though their chances of winning the book token were the same and so they might as well have had the free pen.

Perhaps you’re thinking it was the lousy gift that explained their reaction. Couldn’t the researchers have tempted the students with a slightly more enticing freebie? Maybe, but that’s not the issue. The important detail here is that the students were shown the number on the original lottery ticket. This meant that having swapped their original ticket for another, if the number on the original was drawn out of the hat, they would know they’d made the wrong decision.

That said, if you live in the Netherlands, some lottery organisers are one step ahead. In a fiendish example of the exploitation of regret aversion, they’ve designed a lottery in which everyone’s unique postcode is automatically entered into the draw. Although you can only win if you’ve paid for a ticket, in any given week you can look up to see whether you’d have won, if only you had bothered to enter.

Lottery tickets normally sell hope. This one also sells protection from the sickening thought that your number came up while you were being sensible. Everyone already owns a postcode, so non-participation acquires a visible counterfactual. There is no vague fantasy about what might have happened. The result can point at your street and say: this could have been yours.

Most products would kill for an absence that tangible. The unused pension match shown in pounds. The last train missed by four minutes. The repair delayed until a £40 annoyance becomes a £900 invoice. Suddenly “doing nothing” has a price tag and a photograph.

Regret is potent because it recruits the customer’s own imagination. The seller need not describe the pain in heroic copy; the buyer supplies a version tailored to themselves. That makes accuracy even more important. A personalised counterfactual can feel true long before it is fair. Lotteries are where behavioural cleverness can become predatory very quickly. The sting will be greatest for the person who cannot comfortably afford another ticket. Manufactured countdowns perform the same grubby trick: invent the future regret, place it under the customer’s nose, then call the resulting panic a conversion.

The commercially useful distinction is between real loss and rented panic. An expiring employer contribution has a number, a date and a consequence. A generic countdown has typography. When both sit beside the postpone button, customers can tell which business is clarifying a decision and which one has simply hired a clock to do the bullying.