House Money Effects in Public Good Experiments
Are decisions in economics experiments distorted because the money subjects risk comes from the experimenter rather than their own pockets? There is some evidence that people receiving small, one time “windfall gains” have a higher marginal propensity to consume them, and when doing so, exhibit greater risk-seeking behaviour. This has been found in individual decision making experiments when anticipated wealth effects have been controlled, and labelled the “house money effect.” In public good experiments, house money effects could be driving the high levels of voluntary contributions commonly observed. This possibility is tested by comparing VCM contribution rates when subjects supply their own endowments with those when endowments are provided, while holding constant the distribution of promised earnings. No evidence of house money effects is found, suggesting that use of “free” initial money endowments does not distort subsequent contributions in VCM environments. Copyright Kluwer Academic Publishers 2002
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Kreps, David M. & Milgrom, Paul & Roberts, John & Wilson, Robert, 1982.
"Rational cooperation in the finitely repeated prisoners' dilemma,"
Journal of Economic Theory,
Elsevier, vol. 27(2), pages 245-252, August.
- David Kreps & Paul Milgrom & John Roberts & Bob Wilson, 2010. "Rational Cooperation in the Finitely Repeated Prisoners' Dilemma," Levine's Working Paper Archive 239, David K. Levine.
- Weimann, Joachim, 1994. "Individual behaviour in a free riding experiment," Journal of Public Economics, Elsevier, vol. 54(2), pages 185-200, June.
- Richard H. Thaler & Eric J. Johnson, 1990. "Gambling with the House Money and Trying to Break Even: The Effects of Prior Outcomes on Risky Choice," Management Science, INFORMS, vol. 36(6), pages 643-660, June.
- Lee, Tong Hun, 1975. "More on Windfall Income and Consumption," Journal of Political Economy, University of Chicago Press, vol. 83(2), pages 407-17, April.
- H. Elizabeth Peters & A. Sinan Unur & Jeremy Clark & William D. Schulze, 2004. "Free-Riding and the Provision of Public Goods in the Family: A Laboratory Experiment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(1), pages 283-299, 02.
- Andreoni, J., 1993.
"Cooperation in Public Goods Experiments: Kindness or Confusion?,"
9309, Wisconsin Madison - Social Systems.
- Andreoni, James, 1995. "Cooperation in Public-Goods Experiments: Kindness or Confusion?," American Economic Review, American Economic Association, vol. 85(4), pages 891-904, September.
- Robert Slonim & Alvin E. Roth, 1998. "Learning in High Stakes Ultimatum Games: An Experiment in the Slovak Republic," Econometrica, Econometric Society, vol. 66(3), pages 569-596, May.
- Shefrin, Hersh M & Thaler, Richard H, 1988. "The Behavioral Life-Cycle Hypothesis," Economic Inquiry, Western Economic Association International, vol. 26(4), pages 609-43, October.
- Keeler, James P & James, William L & Abdel-Ghany, Mohamed, 1985. "The Relative Size of Windfall Income and the Permanent Income Hypothesis," Journal of Business & Economic Statistics, American Statistical Association, vol. 3(3), pages 209-15, June.
- Cummings, Ronald G & Harrison, Glenn W & Rutstrom, E Elisabet, 1995. "Homegrown Values and Hypothetical Surveys: Is the Dichotomous Choice Approach Incentive-Compatible?," American Economic Review, American Economic Association, vol. 85(1), pages 260-66, March.
- Hoffman, Elizabeth & McCabe, Kevin & Smith, Vernon L, 1996. "Social Distance and Other-Regarding Behavior in Dictator Games," American Economic Review, American Economic Association, vol. 86(3), pages 653-60, June.
- Kachelmeier, Steven J & Shehata, Mohamed, 1992. "Examining Risk Preferences under High Monetary Incentives: Experimental Evidence from the People's Republic of China," American Economic Review, American Economic Association, vol. 82(5), pages 1120-41, December.
- Andreoni, James, 1988. "Why free ride? : Strategies and learning in public goods experiments," Journal of Public Economics, Elsevier, vol. 37(3), pages 291-304, December.
- Battalio, Raymond C & Kagel, John H & Jiranyakul, Komain, 1990. "Testing between Alternative Models of Choice under Uncertainty: Some Initial Results," Journal of Risk and Uncertainty, Springer, vol. 3(1), pages 25-50, March.
When requesting a correction, please mention this item's handle: RePEc:kap:expeco:v:5:y:2002:i:3:p:223-231. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla)or (Rebekah McClure)
If references are entirely missing, you can add them using this form.