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Revisiting the house money effect in the field: Evidence from casino jackpots

Raphael Flepp and Maximilian Rüdisser

Economics Letters, 2019, vol. 181, issue C, 146-148

Abstract: This paper tests the house money effect, i.e., that prior gains increase subsequent risk-taking behavior, in the field. We use individual-level slot machine gambling records of 5,169 players from a real casino and employ jackpot hits as exogenous house money shocks. Our results show that players wager significantly less money after hitting a jackpot, which implies that players reduce their risk-taking behavior and thus act more cautiously after experiencing gains. We fail to replicate the house money effect in the field and find evidence for a reverse house money effect. Furthermore, while risk-taking behavior is reduced after hitting a jackpot, the jackpot size has no additional effect.

Keywords: House money effect; Decision-making; Risk; Field study; Casino (search for similar items in EconPapers)
JEL-codes: D81 (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1016/j.econlet.2019.05.026

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