Is it my money or not? An experiment on risk aversion and the house-money effect

Cárdenas, Juan Camilo; Roux, Nicolas; Jaramillo, Christian; Martı́nez, Luis

doi:10.1007/s10683-013-9356-x

Cited by 45 publications

(48 citation statements)

References 18 publications

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“…We note that our protocol may also suffer from house money effects (Cárdenas et al, 2014). 12 We provide summary information on subjects' lottery choices in Appendix A.4.…”

Section: Resultsmentioning

confidence: 99%

Structural estimation of farmers’ risk and ambiguity preferences: a field experiment

Bougherara

Gassmann

Piet

et al. 2017

European Review of Agricultural Economics

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Ever since Ellsberg (1961), the distinction between risk, where agents assign well-defined probabilities to possible outcomes, and ambiguity, where agents do not, has been of particular interest. Using a carefully-designed field experiment, we elicit information about risk and ambiguity preferences among 197 French farmers and structurally estimate these preferences. We use cumulative prospect theory and a multiple-prior model in order to model risk and ambiguity preferences, respectively. We find that farmers are risk, ambiguity, and loss averse, and that probability distortion differs in gains vs. losses, as well as in risk vs. ambiguity. These findings can have important implications for policy design.

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“…We note that our protocol may also suffer from house money effects (Cárdenas et al, 2014). 12 We provide summary information on subjects' lottery choices in Appendix A.4.…”

Section: Resultsmentioning

confidence: 99%

Structural estimation of farmers’ risk and ambiguity preferences: a field experiment

Bougherara

Gassmann

Piet

et al. 2017

European Review of Agricultural Economics

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“…A casino constitutes an ideal setting to examine the risk-taking behavior of individuals. Indeed, other studies have used data from casinos to study risk-taking in the presence of prior outcomes (e.g., Rüdisser et al 2017) or have implemented casino-style tasks in their experimental studies (e.g., Arkes et al 1994;Weber and Zuchel 2005;Cárdenas et al 2014). Moreover, casino data allow us to differentiate between paper losses and realized losses.…”

Section: Casino Settingmentioning

confidence: 99%

“…We observe the risk-taking behavior of individual gamblers in a real-life Swiss casino within and across several visits. We thus follow earlier studies on risk-taking that have used data from casinos (e.g., Rüdisser et al 2017;Flepp and Rüdisser 2019) or have implemented casino-style tasks in their experimental studies (e.g., Arkes et al 1994;Weber and Zuchel 2005;Cárdenas et al 2014). Moreover, the examination of casino customers is highly relevant because the majority of the population in western countries has participated in traditional forms of gambling such as wagering in casinos, betting or lottery gambling at least once in their lives (Potenza et al 2002).…”

Section: Introductionmentioning

confidence: 99%

The Effect of Paper Versus Realized Losses on Subsequent Risktaking: Field Evidence From Casino Gambling

et al. 2020

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In this paper, we test the realization effect, i.e., that risk-taking increases after a paper loss, whereas risk-taking decreases after a realized loss, using gambling data from a real casino. During a particular casino visit, losses are likely perceived as paper losses because the chance to offset prior losses remains effective until leaving the casino. However, when casino customers leave the casino, the final account balance is realized. Using individual-level slot machine gambling records, we find that risktaking after paper losses increases during a visit and that this effect is more pronounced for larger losses. Conversely, risktaking across multiple visits is not altered if the realized losses are comparatively small, whereas risk-taking is reduced if realized losses are comparatively large.

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“…A second method, used by Cárdenas, De Roux, Jaramillo, and Martinez (2013), involves giving money to subjects in advance and requires them to bring it to the experiment. Such a method enables the participants to "bond" with the funds as after a period of time of being in possession they might start considering them their own.…”

Section: Experimental Design and Proceduresmentioning

confidence: 99%

The house money effect and negative reciprocity

Danková¹,

Servátka²

2015

Journal of Economic Psychology

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In the vast majority of experiments documenting the existence of reciprocity subjects are endowed with windfall funds. In some situations such endowments might create a so-called "house money effect". We identify two reasons why the source of endowment might matter for negative reciprocity: (1) Using earned -as opposed to windfall money -might increase the costs of negative reciprocity due to this money being in a different mental account and thus lead to less retaliation. (2) Decreasing a decision-maker's endowment consisting of earned money might be considered a stronger violation of property rights and lead to more retaliation. We test our conjectures in an experiment and find that subjects retaliate more in both cases.

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Is it my money or not? An experiment on risk aversion and the house-money effect

Cited by 45 publications

References 18 publications

Structural estimation of farmers’ risk and ambiguity preferences: a field experiment

Structural estimation of farmers’ risk and ambiguity preferences: a field experiment

The Effect of Paper Versus Realized Losses on Subsequent Risktaking: Field Evidence From Casino Gambling

The house money effect and negative reciprocity

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