Economics at your fingertips  

House money effects on trust and reciprocity

Daniel Houser () and Erte Xiao ()

Public Choice, 2015, vol. 163, issue 1, 187-199

Abstract: In a typical laboratory “Investment Game” experiment, participants’ endowments are provided by the experimenter; thus, the worst case for the investor is that she loses all of her “found” money. By contrast, in naturally occurring environments, investment decisions can often lead to a loss of one’s own money. This paper investigates whether “trust” found in one-shot anonymous laboratory interaction is robust to “own money” environments. Our results show that, consistent with previous investment game results, most investors send a positive amount, and most trustees return at least the transfer amount, regardless of whether the investors purchase or are gifted their endowment. However, investments are on average lower when participants use their own money, and the fraction of maximum investments (the most “risky” investment decision) is only half as large under “own money” as it is under gifted endowments. Our results explain why one should exercise caution in placing trust in any government’s ability to spend other people’s money prudently. Copyright Springer Science+Business Media New York 2015

Keywords: House money; Investment games; Experiments (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5) Track citations by RSS feed

Downloads: (external link) (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Ordering information: This journal article can be ordered from
http://www.springer. ... ce/journal/11127/PS2

DOI: 10.1007/s11127-014-0218-7

Access Statistics for this article

Public Choice is currently edited by WIlliam F. Shughart II

More articles in Public Choice from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().

Page updated 2021-12-26
Handle: RePEc:kap:pubcho:v:163:y:2015:i:1:p:187-199