Article

Experimental Economics

, Volume 13, Issue 2, pp 189-205

My money or yours: house money payment effects

  • Larry R. DavisAffiliated withSchool of Business and Economics, Michigan Technological University
  • , B. Patrick JoyceAffiliated withSchool of Business and Economics, Michigan Technological University
  • , Matthew R. RoelofsAffiliated withDepartment of Economics, College of Business and Economics, Western Washington University Email author 

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Abstract

This paper reports the results of an experiment designed to study how subjects’ decision making may be affected by the timing of participation payments (or show-up fees). The experiment follows Davis et al. (J. Econ. 30:69–95, 2004) where subjects were asked to make a sequential purchase decision and were given the opportunity to purchase information about the value of a good prior to a decision to purchase the good itself. There, subjects purchased information less often than expected which was interpreted as risk-seeking behavior. Here, we test a payment hypothesis by varying the timing of the participation payment. Payment of a show-up fee before the decision-making stages of the experiment increases information purchase, which we interpret as an increase in risk-averse behavior.

Keywords

Payment timing Information Decision uncertainty Show-up fee Participation payment

JEL Classification

B40 C91 D80