Hostname: page-component-6bf8c574d5-xtvcr Total loading time: 0 Render date: 2025-02-28T18:40:39.281Z Has data issue: false hasContentIssue false
  • English
  • Français

Experimental (re-)analysis of the house-money effect in a public goods game

Published online by Cambridge University Press:  17 January 2025

Nicholas T. Bailey ,
Abhijit Ramalingam  and
Brock V. Stoddard Open the ORCID record for Brock V. Stoddard [Opens in a new window]
Nicholas T. Bailey*
Affiliation:
Deloitte, 150 Fayetteville Street Mall, 27601 Raleigh, NC, USA
Abhijit Ramalingam*
Affiliation:
Department of Economics, Walker College of Business, Appalachian State University, Peacock Hall, 28608 Boone, NC, USA
Brock V. Stoddard*
Affiliation:
Department of Economics, Walker College of Business, Appalachian State University, Peacock Hall, 28608 Boone, NC, USA
*
baileynt@appstate.edu
ramalingama@appstate.edu
e-mail: stoddardbv@appstate.edu
Get access Rights & Permissions [Opens in a new window]

Abstract

Experiments in economics usually provide subjects with starting capital to be used in the experiment. This practice could affect decisions as there is no risk of loss. This phenomenon is known as the house-money effect. In a repeated public goods game, we test for house-money effects by paying subjects in advance an amount they could lose in the experiment. We do not find evidence of a house-money effect over time.

Keywords

House-moneyCooperationPublic goodsExperiment

JEL classification

H41: Public Goods C91: Laboratory, Individual Behavior C92: Laboratory, Group Behavior
Type
Original Paper
Information
Journal of the Economic Science Association , Volume 9 , Issue 1 , June 2023 , pp. 1 - 14
Copyright
Copyright © The Author(s), under exclusive licence to Economic Science Association 2022. corrected publication 2023.

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

The original online version of this article was revised: Due to incorrect details in the reference Cherry et al., (2005). Now, it has been corrected.

A correction to this article is available online at https://doi.org/10.1007/s40881-023-00126-6.

corrected publication 2023

References

Arkes, H. R., Joyner, C. A., Pezzo, M. V., Nash, J. G., Siegel-Jacobs, K., Stone, E. (1994). The psychology of windfalls. Organizational Behavior and Human Decision Processes, 59, 331–347. 10.1006/obhd.1994.1063CrossRefGoogle Scholar
Bosch-Domenech, A., Silvestre, J. (2010). Averting risk in the face of large losses: Bernoulli vs. Tversky and Kahneman. Economics Letters, 107, 180–182. 10.1016/j.econlet.2010.01.018CrossRefGoogle Scholar
Brañas-Garza, P., Molis, E., Neyse, L. (2021). Exposure to inequality may cause under-provision of public goods: Experimental evidence. Journal of Behavioral and Experimental Economics, 92 10.1016/j.socec.2021.101679CrossRefGoogle Scholar
Cárdenas, J. C., De Roux, N., Jaramillo, C. R., Martinez, L. R. (2014). Is it my money or not? An experiment on risk aversion and the house-money effect. Experimental Economics, 17, 47–60. 10.1007/s10683-013-9356-xCrossRefGoogle Scholar
Chaudhuri, A. (2011). Sustaining cooperation in laboratory public goods experiments: A selective survey of the literature. Experimental Economics, 14, 47–83. 10.1007/s10683-010-9257-1CrossRefGoogle Scholar
Cherry, T. L., Kroll, S., Shogren, J. F. (2005). The impact of endowment heterogeneity and origin on public good contributions: evidence from the lab. Journal of Economic Behavior and Organization, 57, 357–365. 10.1016/j.jebo.2003.11.010CrossRefGoogle Scholar
Clark, J. (2002). House money effects in public good experiments. Experimental Economics, 5, 223–231. 10.1023/A:1020832203804CrossRefGoogle Scholar
Davis, L. R., Joyce, B. P., Roelofs, M. R. (2010). My money or yours: House money payment effects. Experimental Economics, 13, 189–205. 10.1007/s10683-010-9235-7CrossRefGoogle Scholar
Fehr, E., Gachter, S. (2000). Cooperation and punishment in public goods experiments. American Economic Review, 90, 980–994. 10.1257/aer.90.4.980CrossRefGoogle Scholar
Fischbacher, U. (2007). z-Tree: Zurich toolbox for ready-made economic experiments. Experimental Economics, 10, 171–178. 10.1007/s10683-006-9159-4CrossRefGoogle Scholar
Greiner, B. (2015). Subject pool recruitment procedures: Organizing experiments with ORSEE. Journal of the Economic Science Association, 1, 114–125. 10.1007/s40881-015-0004-4CrossRefGoogle Scholar
Harrison, G. W. (2007). House money effects in public good experiments: Comment. Experimental Economics, 10, 429–437. 10.1007/s10683-006-9145-xCrossRefGoogle Scholar
Isaac, R. M., Walker, J., Thomas, S. (1984). Divergent evidence on free riding: An experimental examination of possible explanations. Public Choice, 43, 113–149. 10.1007/BF00140829CrossRefGoogle Scholar
Keasey, K., Moon, P. (1996). Gambling with the house money in capital expenditure decisions: An experimental analysis. Economics Letters, 50, 105–110. 10.1016/0165-1765(95)00726-1CrossRefGoogle Scholar
Kreps, D. M., Milgrom, P., Roberts, J., Wilson, R. (1982). Rational cooperation in the finitely repeated prisoners’ dilemma. Journal of Economic Theory, 27, 245–252. 10.1016/0022-0531(82)90029-1CrossRefGoogle Scholar
Lee, D. S. (2009). Training, wages, and sample selection: Estimating sharp bounds on treatment effects. Review of Economic Studies, 76, 1071–1102. 10.1111/j.1467-937X.2009.00536.xCrossRefGoogle Scholar
Rosenboim, M., Shavit, T. (2012). Whose money is it anyway? Using prepaid incentives in experimental economics to create a natural environment. Experimental Economics, 15, 145–157. 10.1007/s10683-011-9294-4CrossRefGoogle Scholar
Sefton, M., Shupp, R., Walker, J. M. (2007). The effect of rewards and sanctions in provision of public goods. Economic Inquiry, 45, 671–690. 10.1111/j.1465-7295.2007.00051.xCrossRefGoogle Scholar
Tauchmann, H. (2014). Lee (2009) treatment-effect bounds for nonrandom sample selection. The Stata Journal, 14, 884–894. 10.1177/1536867X1401400411CrossRefGoogle Scholar
Thaler, R. H., Johnson, E. J. (1990). Gambling with the house money and trying to break even: The effects of prior outcomes on risky choice. Management Science, 36, 643–660. 10.1287/mnsc.36.6.643CrossRefGoogle Scholar
Supplementary material: File

Bailey et al. supplementary material

Bailey et al. supplementary material
Download Bailey et al. supplementary material(File)
File 353.2 KB