Do Casinos Pay their Customers to Become Risk-averse? Revising the House Money Effect in a Field Experiment

Maximilian Rüdisser, Raphael Flepp and Egon Franck

No 360, Working Papers from University of Zurich, Department of Business Administration (IBW)

Abstract: In order to promote risky behavior, it is a common practice that casinos incentivize their customers through the provision of free financial means, i.e., free play. Thereby, casino operators try to exploit what is known as the house money effect. However, evidence from the field is scarce and prior research provides explanations that predict different behavioral outcomes. This experimental study analyzes the gambling behavior of 765 casino customers and finds that incentivized customers show not higher but significantly lower levels of riskseeking behavior, expressed through lower wagers per game and overall smaller losses. This study thus provides evidence against the existence of a house money effect.

Keywords: House money effect; Prospect theory; Field experiment; Casino gambling (search for similar items in EconPapers)
JEL-codes: C93 D80 D81 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2015-12
New Economics Papers: this item is included in nep-upt
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http://repec.business.uzh.ch/RePEc/zrh/wpaper/360_IBW_full.pdf (application/pdf)

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Journal Article: Do casinos pay their customers to become risk-averse? Revising the house money effect in a field experiment (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:zrh:wpaper:360

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