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Not All Income is the Same to Everyone: Cognitive Ability and the House Money Effect in Public Goods Games

Julian Hackinger

MPRA Paper from University Library of Munich, Germany

Abstract: The provision of public goods often suffers from a social dilemma generating too little contributions. Yet, it remains an open question how positive contributions materialise. Existing studies suggest that individuals' decisions on how much to contribute depend on cognitive skills. Furthermore, mental accounting research indicates that the source of income matters for economic decision making. I show experimentally that subjects' contributions in a one-shot linear public goods game depend on an interplay of the two factors. While a house money effect exists for subjects with low cognitive skills there is no such effect for those with high cognitive skills. My findings have important implications for taxation, redistribution, and voting behaviour, as well as past and future experiments.

Keywords: Public Goods; Experiment; Cognitive Skills; House Money Effect; Mental Accounting; Endowment Source (search for similar items in EconPapers)
JEL-codes: C91 D03 H41 (search for similar items in EconPapers)
Date: 2016-04-19
New Economics Papers: this item is included in nep-cbe, nep-exp and nep-neu
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