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Estimation of the House Money Effect Using Hurdle Models

  • Christoph Engel

    ()

    (Max Planck Institute for Research on Collective Goods, Bonn)

  • Peter G. Moffat

    (School of Economics, University of East Anglia, Norwich, UK)

Evidence from an experiment investigating the “house money effect” in the context of a public goods game is reconsidered. Analysis is performed within the framework of the panel hurdle model, in which subjects are assumed to be one of two types: free-riders, and potential contributors. The effect of house money is seen to be significant in the first hurdle: specifically, house money makes a subject more likely to be a potential contributor. Hence we find that the effect of house money is more than just an effect on behaviour; it has the effect of changing a subject from one type to another. This result is potentially important in the external validity debate.

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Paper provided by Max Planck Institute for Research on Collective Goods in its series Working Paper Series of the Max Planck Institute for Research on Collective Goods with number 2012_13.

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Date of creation: May 2012
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Handle: RePEc:mpg:wpaper:2012_13
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  1. Fischbacher, Urs & Gachter, Simon & Fehr, Ernst, 2001. "Are people conditionally cooperative? Evidence from a public goods experiment," Economics Letters, Elsevier, vol. 71(3), pages 397-404, June.
  2. 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.
  3. Urs Fischbacher & Simon Gaechter, 2009. "Social Preferences, Beliefs, and the Dynamics of Free Riding in Public Good Experiments," Discussion Papers 2009-04, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
  4. Christoph Engel, 2011. "Dictator games: a meta study," Experimental Economics, Springer, vol. 14(4), pages 583-610, November.
  5. Nicholas Bardsley & Peter Moffatt, 2005. "The Experimetrics of Public Goods: Inferring Motivations from Contributions," Discussion Papers 2005-09, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
  6. Todd L. Cherry & Peter Frykblom & Jason F. Shogren, 2002. "Hardnose the Dictator," American Economic Review, American Economic Association, vol. 92(4), pages 1218-1221, September.
  7. Jeremy Clark, 2002. "House Money Effects in Public Good Experiments," Experimental Economics, Springer, vol. 5(3), pages 223-231, December.
  8. Diansheng Dong & Harry Kaiser, 2008. "Studying household purchasing and nonpurchasing behaviour for a frequently consumed commodity: two models," Applied Economics, Taylor & Francis Journals, vol. 40(15), pages 1941-1951.
  9. Glenn Harrison, 2007. "House money effects in public good experiments: Comment," Experimental Economics, Springer, vol. 10(4), pages 429-437, December.
  10. Peter Moffatt & Simon Peters, 2001. "Testing for the Presence of a Tremble in Economic Experiments," Experimental Economics, Springer, vol. 4(3), pages 221-228, December.
  11. Diansheng Dong & Chanjin Chung & Harry Kaiser, 2004. "Modelling milk purchasing behaviour with a panel data double-hurdle model," Applied Economics, Taylor & Francis Journals, vol. 36(8), pages 769-779.
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