Experimental Economics

, Volume 9, Issue 1, pp 5–16

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

  • Lucy F. Ackert
  • Narat Charupat
  • Bryan K. Church
  • Richard Deaves
Article

DOI: 10.1007/s10683-006-1467-1

Cite this article as:
Ackert, L.F., Charupat, N., Church, B.K. et al. Exp Econ (2006) 9: 5. doi:10.1007/s10683-006-1467-1

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.

Keywords

House moneyProspect theory

Copyright information

© Springer Science + Business Media, LLC 2006

Authors and Affiliations

  • Lucy F. Ackert
    • 1
    • 2
  • Narat Charupat
    • 3
  • Bryan K. Church
    • 4
  • Richard Deaves
    • 3
  1. 1.Department of Economics and Finance, Michael J. Coles College of BusinessKennesaw State UniversityKennesaw
  2. 2.Research DepartmentFederal Reserve Bank of AtlantaAtlanta
  3. 3.Michael G. DeGroote School of BusinessMcMaster UniversityHamiltonCanada
  4. 4.Georgia TechCollege of ManagementAtlanta