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Estimation of the House Money Effect Using Hurdle Models

Author

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  • Christoph Engel

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

  • Peter G. Moffat

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

Abstract

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.

Suggested Citation

  • Christoph Engel & Peter G. Moffat, 2012. "Estimation of the House Money Effect Using Hurdle Models," Discussion Paper Series of the Max Planck Institute for Research on Collective Goods 2012_13, Max Planck Institute for Research on Collective Goods.
  • Handle: RePEc:mpg:wpaper:2012_13
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    File URL: http://www.coll.mpg.de/pdf_dat/2012_13online.pdf
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    References listed on IDEAS

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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. 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.
    3. Christoph Engel, 2011. "Dictator games: a meta study," Experimental Economics, Springer;Economic Science Association, vol. 14(4), pages 583-610, November.
    4. 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.
    5. Urs Fischbacher & Simon Gachter, 2010. "Social Preferences, Beliefs, and the Dynamics of Free Riding in Public Goods Experiments," American Economic Review, American Economic Association, vol. 100(1), pages 541-556, March.
    6. Glenn Harrison, 2007. "House money effects in public good experiments: Comment," Experimental Economics, Springer;Economic Science Association, vol. 10(4), pages 429-437, December.
    7. Peter Moffatt & Simon Peters, 2001. "Testing for the Presence of a Tremble in Economic Experiments," Experimental Economics, Springer;Economic Science Association, vol. 4(3), pages 221-228, December.
    8. 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.
    9. 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.
    10. Nicholas Bardsley & Peter Moffatt, 2007. "The Experimetrics of Public Goods: Inferring Motivations from Contributions," Theory and Decision, Springer, vol. 62(2), pages 161-193, March.
    11. Jeremy Clark, 2002. "House Money Effects in Public Good Experiments," Experimental Economics, Springer;Economic Science Association, vol. 5(3), pages 223-231, December.
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    Cited by:

    1. repec:eee:jeeman:v:84:y:2017:i:c:p:209-222 is not listed on IDEAS
    2. Anne Corcos & François Pannequin & Claude Montmarquette, 2016. "Leaving the market or reducing the coverage?," CIRANO Working Papers 2016s-26, CIRANO.

    More about this item

    Keywords

    Public Good Experiment; Hurdle Model; double hurdle model; Tobit; panel data;

    JEL classification:

    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models; Switching Regression Models; Threshold Regression Models
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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