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The House Money Effect and Negative Reciprocity

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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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  • Katarína Danková & Maroš Servátka, 2014. "The House Money Effect and Negative Reciprocity," Working Papers in Economics 14/06, University of Canterbury, Department of Economics and Finance.
  • Handle: RePEc:cbt:econwp:14/06
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    Cited by:

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    3. Katarína Danková & Hodaka Morita & Maroš Servátka & Le Zhang, 2022. "Fairness concerns and job assignment to positions with different surplus," Southern Economic Journal, John Wiley & Sons, vol. 88(4), pages 1490-1516, April.
    4. James, Alexander & Rivera, Nathaly M., 2022. "Oil, politics, and “Corrupt Bastards”," Journal of Environmental Economics and Management, Elsevier, vol. 111(C).
    5. De Geest, Lawrence R. & Kidwai, Abdul H. & Portillo, Javier E., 2022. "Ours, not yours: Property rights, poaching and deterrence in common-pool resources," Journal of Economic Psychology, Elsevier, vol. 89(C).
    6. Bejarano, Hernán & Corgnet, Brice & Gómez-Miñambres, Joaquín, 2021. "Economic stability promotes gift-exchange in the workplace," Journal of Economic Behavior & Organization, Elsevier, vol. 187(C), pages 374-398.
    7. Gago, Andrés, 2021. "Reciprocity and uncertainty: When do people forgive?," Journal of Economic Psychology, Elsevier, vol. 84(C).
    8. James C. Cox & Maroš Servátka & Radovan Vadovič, 2017. "Status quo effects in fairness games: reciprocal responses to acts of commission versus acts of omission," Experimental Economics, Springer;Economic Science Association, vol. 20(1), pages 1-18, March.
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    More about this item

    Keywords

    Real Effort; Experiment; House money; Reciprocity; Taking Game;
    All these keywords.

    JEL classification:

    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers

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