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The effect of paper outcomes versus realized outcomes on subsequent risk-taking: Field evidence from casino gambling

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  • Flepp, Raphael
  • Meier, Philippe
  • Franck, Egon

Abstract

We test the realization effect, i.e., that risk-taking is greater after paper outcomes than after realized outcomes, using gambling data from a real casino. During a particular casino visit, customers likely perceive that gains and losses are paper outcomes, whereas leaving the casino realizes the final account balance. Using individual-level slot machine gambling records, we find that risk-taking after both paper losses and paper gains increases within a visit and that this effect is more pronounced for larger outcomes. Conversely, realized losses from earlier visits significantly decrease risk-taking if losses are comparatively large, whereas comparatively small realized losses and realized gains do not alter risk-taking. These results provide important field validation of the realization effect in an environment with positively skewed lotteries.

Suggested Citation

  • Flepp, Raphael & Meier, Philippe & Franck, Egon, 2021. "The effect of paper outcomes versus realized outcomes on subsequent risk-taking: Field evidence from casino gambling," Organizational Behavior and Human Decision Processes, Elsevier, vol. 165(C), pages 45-55.
    • Handle: RePEc:eee:jobhdp:v:165:y:2021:i:c:p:45-55
    DOI: 10.1016/j.obhdp.2021.04.003
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