The House Money Effect and Negative Reciprocity

Katarína Danková and Maroš Servátka

Working Papers in Economics from University of Canterbury, Department of Economics and Finance

Abstract: 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.

Keywords: Real Effort; Experiment; House money; Reciprocity; Taking Game (search for similar items in EconPapers)
JEL-codes: C71 C91 D03 D64 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2014-02-07
New Economics Papers: this item is included in nep-cbe, nep-exp, nep-soc and nep-sog
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https://repec.canterbury.ac.nz/cbt/econwp/1406.pdf (application/pdf)

Related works:
Journal Article: The house money effect and negative reciprocity (2015)
Working Paper: The House Money Effect and Negative Reciprocity (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:cbt:econwp:14/06

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