An experimental examination of the house money effect in a multi-period setting

Lucy F. Ackert (), Narat Charupat (), Bryan Church () and Richard Deaves ()

Experimental Economics, 2006, vol. 9, issue 1, pages 5-16

Abstract: There is evidence that risk-taking behavior is influenced by prior monetary gains and losses. When endowed with house money, people become more risk taking. This paper is the first to report a house money effect in a dynamic, financial setting. Using an experimental method, we compare market outcomes across sessions that differ in the level of cash endowment (low and high). Our experimental results provide support for a house money effect. Traders’ bids, price predictions, and market prices are influenced by the amount of money that is provided prior to trading. However, dynamic behavior is difficult to interpret due to conflicting influences. Copyright Springer Science + Business Media, LLC 2006

Keywords: House money; Prospect theory (search for similar items in EconPapers)
Date: 2006
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Working Paper: An experimental examination of the house money effect in a multi-period setting (2003)
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